From the Wall Street Journal:
Mortgage Crisis Extends Its Reach
Fannie, Freddie Regain Dominance As Investors Shrink From Housing
‘Capitalism Isn’t Perfect’
By JAMES R. HAGERTY
November 13, 2007; Page A1
Ever since the Great Depression, the American home-loan business has included a dollop of socialism. It was sometimes lost from view amid the frenzy of the housing boom, when Wall Street eagerly provided capital for lending. But with that game over, the government’s role is expanding again.
In a growing percentage of cases, government-linked bodies are the ones putting up the cash for home loans and taking the risk that a borrower won’t pay the money back. Private enterprise’s role is narrowing in many instances to the job of arranging loans, providing the initial funding until the loans can be sold, and handling the monthly paper work.
For home buyers, the renewed dominance of government-related entities means the end of the era of endless choice and easy approvals on mortgages. Borrowers now generally must meet tighter standards familiar from earlier years, such as proving their income and making a down payment of 10% to 20%.
The expanding government role isn’t the result of initiatives from Washington. As investors have fled from housing exposure, lenders wanting to sell loans they make have had no choice but to rely more on existing agencies that will still buy mortgages, like government-sponsored Fannie Mae and Freddie Mac.
To raise funds to lend in the first place, lenders are leaning more heavily on the 12 regional Federal Home Loan Banks, which are cooperatives chartered by Congress but owned by commercial banks and other financial institutions. The Home Loan Banks’ loans to financial institutions — which are known as “advances” and typically secured by mortgage loans — grew 29% in the first nine months of 2007, to $824 billion. Fannie Mae, Freddie Mac and the Home Loan Banks aren’t government agencies, but because of their federal charters, it’s widely assumed the government would bail them out if they ever got into a crisis.
In addition, some mortgage lenders — among them the largest, Countrywide Financial Corp. — are growing more reliant on deposits insured by another government agency, the Federal Deposit Insurance Corp. “Capitalism isn’t perfect,” says CEO Angelo Mozilo of Countrywide, which had a $1.2 billion loss in the third quarter as investors suddenly grew allergic to mortgages they had eagerly bought before.
…
The new reliance on the government-sponsored mortgage buyers has prompted some congressmen and senators to call for giving them even more scope to purchase or guarantee mortgages. The companies package loans made by mortgage lenders into securities; they keep some of these securities as investments, and others are sold to investors world-wide. For mortgage securities sold to other investors, Fannie and Freddie collect fees for guaranteeing that payments will be made on the loans.
…
Among U.S. mortgage securities offered to investors, the portion guaranteed by Fannie and Freddie has rebounded to around 72% in October from as low as about 41% in 2005 at the height of the housing boom, when Wall Street gobbled up loans with no federal backing, according to trade publication Inside Mortgage Finance.The shift isn’t just because Fannie and Freddie are guaranteeing more loans, although they are. At the end of September, Fannie either owned or guaranteed $2.76 trillion of mortgages, or around a quarter of the total outstanding, up from $2.48 trillion a year earlier.
…
Fannie and Freddie require borrowers to pay for mortgage insurance if they don’t make sizable down payments, and they generally require more documentation of income than some private-sector lenders did in recent years. Fannie and Freddie also haven’t gone as far as Wall Street did in accepting large amounts of loans that allow borrowers to make minimal payments in the early years, an arrangement that can result in a growing loan balance. Because investors don’t want to buy these permissive loans either, few are currently being made.
…
Fannie, Freddie and mortgage lenders are facing the challenge of deciding how much credit to extend when prices of homes, the collateral backing the loans, are falling in much of the country. Regulators and politicians are prodding Fannie, Freddie and the FHA to help subprime borrowers refinance into fixed-rate loans with payments they can afford. The risk is that these borrowers, given their poor credit histories, would run into trouble again.Some analysts fear Fannie and Freddie would need to raise additional capital if defaults soared well beyond current expectations. Their stocks have started to wobble, though they are still holding up far better than shares of purely private-sector mortgage companies. Fannie last week reported that its earnings in the first nine months were down 56% from a year earlier, to $1.51 billion. On the New York Stock Exchange, Fannie’s shares closed at $47.06 yesterday, down 21% so far this year.
Despite America’s market system, politicians have long behaved as if housing were too important to be left exposed to the full blast of market forces. Congress has always given overwhelming backing to the FHA, Fannie Mae and the home loan banks — all created during the Depression when banks were failing and mortgage credit evaporated. Freddie Mac was created in 1970 to supplement Fannie’s role.
…
Now the debate in Washington has shifted 180 degrees. “If these government-related entities were not in place, this [mortgage-default crisis] would be a disaster of far greater dimensions,” says Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, who was a senior housing official in the Clinton administration and has done consulting work for Freddie. She notes that the companies kept money flowing into mortgages even at the height of investors’ panic in August.Fannie and Freddie bring uniform standards to the mortgage securities they back, making the securities easier to trade and value, Ms. Wachter says. The trillions of dollars of mortgage securities that were sold without their involvement during the housing boom didn’t have uniform quality and have proven illiquid because investors find it hard to assess the risks.
…
Long after the current mortgage crisis is over, Fannie and Freddie are likely to keep reminding Congress of the turmoil of mid-2007, when other investors retreated but the two government-sponsored companies kept buying mortgages. Freddie recently posted on its Web site a note entitled “Shelter in a Storm,” declaring: “Even when other lenders stop lending, we continue to provide a steady source of home funding.”Alex Pollock, a resident fellow at the American Enterprise Institute, agrees government-linked entities can help markets through a panic, but believes they shouldn’t dominate the home-loan business in other times. The trick is to withdraw the government support when it’s no longer needed and let the free market take over again, says Mr. Pollock, a former chief executive of the Federal Home Loan Bank of Chicago.
From the Home News Tribune:
Thermostats dip, prices rise
When she thinks about the cost of home heating oil as the winter nears, Lillian Sena says, “Overall, it’s very depressing.”
And she’s a seller, working as the office manager for Jerry’s Heating Service of Woodbridge.
For buyers, the average homeowner will pay an average of $319 more this winter than last to heat with oil, according to Tom Evans, an energy analyst with Citi Futures Perspective.
The average price for a gallon of home heating oil in New Jersey is $3.20, according to the New Jersey Fuel Merchants Association.
The price charged by Jerry’s Heating Service is $3.089 per gallon for cash customers and $3.289 for credit.
The price is dictated by the worldwide market, and is beyond the control of an independent distributor.
“We work at a very low profit margin,” Sena said.
As gasoline prices have risen at the pump, many motorists are able to alter driving habits to cut down on fuel use. The options for homeowners include turning down the thermostat, improving insulation or changing to natural gas — an option sometimes limited by location and cost.
About 20 percent of New Jersey homeowners use heating oil to heat their home.
This winter the option of natural gas is more attractive. The cost to 1.7 million customers of PSE&G will remain the about the same as last winter, according to spokeswoman Karen Johnson.
From MarketWatch:
Home Depot 3rd Quarter Net Falls 27% On Weak Housing Market
Home Depot Inc.’s third-quarter net income fell 27% to $1.09 billion, or 60 cents a share, from $1.49 billion, or 73 cents a share, a year earlier, due in part a soft housing market. Earnings from continuing operations were 59 cents a share, compared with 65 cents a share in the year-earlier period. The Atlanta-based home-improvement retailer said sales for the quarter ended Oct. 28 declined 3.5% to $18.96 billion from $19.65 billion, as same-store sales fell 6.2%. On average, analysts surveyed by Thomson Financial predicted earnings of 60 cents a share on revenue of $19.43 billion. Looking ahead, Home Depot predicts 2007 earnings from continuing operations to decline by as much as 11% from last year, on a 52-week basis. Home Depot said its full year will include 53 weeks of operating results, with the 53rd week adding about 5 cents to its per-share earnings outlook.
From the WSJ:
E*Trade Plunges 59%
On Analyst Warnings;
Bank Unit Goes Awry
By SUSANNE CRAIG
November 13, 2007; Page A1
Subprime-mortgage problems crashed into another unexpected corner of the financial industry, as online brokerage firm E*Trade Financial Corp.’s shares fell 59% over concerns about shaky securities on its books.
E*Trade’s main business is online investing, but the company also runs a bank that makes and buys mortgage loans and invests in securities backed by mortgages. Late Friday, the company warned in a filing that problems with these investments would lead to bigger-than-expected losses, prompting a flurry of downgrades from Wall Street analysts.
It was the latest ride on the roller coaster for a company that helped pioneer online stock trading, soared during the dot-com bubble, then crashed and ousted its chief executive. E*Trade made a comeback in the past few years, but yesterday’s trading wiped out $2.2 billion in market value as its stock fell $5.04 to $3.55 on the Nasdaq Stock Market. The shares are now back to their August 2002 level.
The fallout from the market for high-risk mortgages has begun hurting companies that on first glance wouldn’t seem vulnerable, including some that deal with individual investors. Some money-market mutual funds, for example, have come under pressure because of exposure to the debt of troubled bank-affiliated investment pools called structured investment vehicles, or SIVs, that invested in mortgage-backed securities.
…
“The mortgage black hole is, I think, worse than anyone thought,” said Tony James, president of private-equity firm Blackstone Group, in a call with analysts yesterday.
How much should one offer for this house?
http://homes.realtor.com/search/listingdetail.aspx?zp=08820&mnp=35&bd=5&typ=7&sid=bc2e9815b5f9462598505168de5f5c9f&pg=3&lid=1091052087&lsn=27&srcnt=63#Detail
Att I guess the real ? is why buy now.If you have to for some reason lowball away.But if you can wait it will surely be cheaper in 6 monthes as a starting point.If it sells, there will be others.No rush you are in control in this market.You could save alot by waiting IMHO.Good luck what ever way you go.
I am not going to bid right now. I’ve seen the predictions by Yale univ. professor – Shiller who has predicted that 2008 might see around 10% declines across the board. So it makes sense at least to wait wait out the 2008 summer at least.
But i was just curious as to how much low that house would go for in today’s market.
Interest things happening in my area,rents are starting to lower.House for 2000 a month now at 1600.Don’t get excited I live to far from the city (vernon nj).Many people forclosed out of homes you would think they would have to rent.I see most rentals just sitting on gsmls.Maybe they are heading out of state.Would if I could.
Short sale in Bergenfield.
71 E JOHNSON AVE
NJMLS# 2743436
Purchased: 8/5/2005
Purchase Price: $389,900
Currently active, listed for $299,000.
23% below 2005 price – nominal
Approximately 28% below 2005 price – real
Even though the seller is already facing a loss, the next cut will be the hardest..
136 Fairmount, Glen Rock NJ
NJMLS# 2741994
Purchased: 2/24/2005
Purchase Price: $545,000
Currently active, listed for $549,000 (down from $629,000)
Att We can float all the #’s we like.Depends on sellers sit.Bottom line is house is worth whatever someone will pay for it.Some real uninformed people out there who might take it at this price.Fools.
Please. Please. Let’s just stop right here and think. Did anything good happen today or it everything gloom and doom all the time? Let’s be positive today. Positive thoughts will make good things happen. Try it and see!
They’re not making anymore real estate and owning it is a positive thing, not a negative thing. Think positive!
Ah, the golden land of BC starts to crumble.By march their will be a lot of these to post.When the spring sales stay flat summer 08 big declines.This is just the start.I have pushed my time line till 09.
REInvestor.
What is positive for some is negative for others. You steal the punch line of realtors of gaga days of 2005 (“They’re not making any more real estate”) and want folks here to blindly follow you. (are you looking to unload some properties in this market??). Prices not dropping is a negative thing for would be buyers like me.
In ideal world, the prices should drop fast and furious in as little time as possible to serve the best needs of all people. Realtors will see business pick up again, buyers can buy at decent prices, and fools who bought at bloated prices learn their lessons and be more responsible in future.
(BTW the punch line you stole from realtors was “They’re not manufacturing land anymore” – not ‘real estate’ as you mention. The builders are still building houses and apartment buildings.)
Just saw a price reduction on a house I was interested in. The current price is a little more than $100k under the 2005 and 2006 comps. At the current price I think it’s a very good value. Already wrote up my offer, have it in hand, but the wife wants to wait!
Moody’s Gets Busy Downgrading Alt-A RMBS Deals; 198 Classes Affected
http://www.housingwire.com/2007/11/12/moodys-gets-busy-downgrading-alt-a-rmbs-deals-198-classes-affected/
reinvestor Yes some good, prices will come down to level people can afford.If you have read my posts this will be a real bad correction.Alot of pain for people foreclosed out of their homes.I do not take any joy in it.How ever no pity for the flippers. You took a shot to make some money & it didn’t work ,tough sh$it!
att says:
How much should one offer for this house?
I am not sure if you are looking in the Edison area, but why would anyone want to live in Edison? Edison has been and always will be an industrial area. There are factories Galore there. I laugh when people say they are from Edison.. I say you live in a factory. Why anyone would want to live in an industrial area is beyond me. And on top of that they complain about smells. Move to suburbia not Industrial areas.
grim.
The thing to think is whether the house will be lower 1 year from now. If Robert Shiller says prices will be 10% lower in 2008 (& given more gloom and doom stories it will accompany), you might be able to lowball even further on top of 10% decline. Depending on how much the house’s cost it, it might be worth more than 6 figures.
Since you are a realtor, it might be fun to talk to them and guage how much lower further they are willing to go (just for fun or as revenge of your last encounter with them :) ), but real bids should be made only keeping the real (worsening) market in mind.
Please. Please. Let’s just stop right here and think. Did anything good happen today or it everything gloom and doom all the time? Let’s be positive today. Positive thoughts will make good things happen. Try it and see!
I’m definitely thinking positive. I’m looking to expand my real estate holdings soon and get some multi-unit buildings. The market is looking better every day!
They’re not making anymore real estate and owning it is a positive thing, not a negative thing. Think positive!
They are making new real estate every day, where they hell do you live?
Grim Maybe your wife could talk to mine, in a big rush.I ‘ll hold out as long as needed have a real comfortable sofa.Good luck whatever you decide to do.
reinvestor101 Says:
November 12th, 2007 at 11:01 pm
“This entire situation is terrible.”
That’s exactly what I said in 9/2005. We finally agree on something. However, I sold. You’re ranting like someone who is entering kindergarten. I wonder who is sleeping better?
#9 grim — that house is being foreclosed
http://www.bcsd.us/sheriff_sale.aspx
(553402.86 1/11/08)
“Let’s be positive today. Positive thoughts will make good things happen. Try it and see!”
50.5 [11],
I guess it’s all relative, depending on your definition of positive.
I am positive that I will be buying at 25-40% off 2005. That’s translates into savings of approx 300K, over the life of a 30 year mortgage. Now those are damn some positive thoughts. On the flip side, you can be positive that RE will continue to decline in 2008/2009 and taxes will continue their exorbitant climb.
My husband and I were talking about our friends who are trying to sell. Part of the issue is the renovation done a few years ago that added a lot to their mortgage (more than $100,000). It seems to have been a trend to increase mortgage or use a home equity line of credit to renovate houses. In the past, homeowners would have saved money to pay for the renovations before starting construction. Now so many are faced with huge mortgages. I really don’t know how some even make the payments. At least they didn’t use the money for other things besides their house but still. I know one family who did a $175,000 renovation on their house with an interest only (first 10 years) home equity line of credit.
Reason really did go out the window during the boom times.
Just got off the phone with my wife, she called me back.
I can’t help but post what she told me..
“We’re not going to buy until there is blood in the streets.”
What a ruthless bitc… I love her!
From MarketWatch:
Countrywide loan fundings fell 48% in October
Mortgage lender Countrywide Financial said Tuesday its total October loan fundings fell 48% from last year, to $22 billion. The firm said its mortgage pipeline at the end of October was $41 billion. Average daily mortgage loan application activity for October 2007 was $1.8 billion, a 34% decrease from October 2006.
The scale of the losses that will hit Wall Street banks could approach half a trillion dollars as large numbers of sub-prime home loans go bad. …
http://news.bbc.co.uk/2/hi/business/7086909.stm
Hearing some snippets about layoffs at Merrill, can anyone confirm?
Just came across this comment at dealbreaker..
*MERRILL REPORT COMES FROM CNBC EDITOR CHARLES GASPARINO
*MERRILL CUTS WOULD AFFECT MORTGAGE-BACKED GROUP, CNBC REPORTS
*MERRILL MAY CUT 25 PERCENT OF FIXED INCOME JOBS, CNBC SAYS
*MERRILL PLANS TO CUT 50% OF STAFF IN MORTGAGE UNIT, CNBC SAYS
*MERRILL PLANS TO CUT 25% OF BOND MARKET STAFF, CNBC SAYS
“We’re not going to buy until there is blood in the streets.”
JB [25],
50.5 will be happy to see that many, on this site, are positive regarding their position. By the way, has she been hanging out with BOOOYAAAA?
From HousingWire:
Moody’s Gets Busy Downgrading Alt-A RMBS Deals; 198 Classes Affected
Moody’s Investors Service apparently decided that downgrading a wide swath of Alt-A backed RMBS deals on a bond market holiday would be good for kicks.
…
Moody’s did not provide a dollar value in terms of the affected classes, but it would seem pretty clear that the mortgage crunch is extending in full swing to Alt-A deals.
Please. Please. Let’s just stop right here and think. Did anything good happen today or it everything gloom and doom all the time? Let’s be positive today. Positive thoughts will make good things happen. Try it and see!
On a positive note, soon hardworking American families will be able to afford a home without having to gamble their financial future on a mortgage better fit for a casino. Buying a home will once again become an avenue for hardworking middle class families to build long-term wealth, rather than an albatross of debt crushing the life out of a young family; praying that a layoff or interest rate reset doesn’t put them out on the street. Families will be able to buy a home without getting into a bidding war with flippers only looking to making a quick buck by installing Home Depot cabinets and granite countertops and expecting exorbitant profits in return at the expense of unknowing buyers who are told by their Realtors to “get in while you still can, or get priced out forever”. A home will one again be a place to live and raise a family and not a commodity.
They’re not making anymore real estate and owning it is a positive thing, not a negative thing. Think positive!
Very true. And at the right price that makes perfect sense. We are just not there yet.
I do think positive. But thinking positive for me means American families being able to afford homes again, not you hitting it big flipping houses.
#29 – Grim,
Merrill also has a statement denying the layoffs out on Reuters right now… just adding some balance. I think the layoffs sound about right. JP has been cutting through back-office staff pretty seriously in the past 2 weeks.
BC,
I gave her my MLS password and showed her how to use it. Homes that she thought were a screaming bargain are now sitting more than 10% lower with no takers.
The change in perception that access to information can create is amazing. It’s easy to be fooled into thinking the market is “fine” when you are being spoon fed information from industry trade groups and observers with a vested interest.
Grim The wife is right,your a lucky guy.Wait it out.
Hey I just thought of something. I wonder how many people who commute to NYC will be affected by layoffs. I am wondering how it will effect public transportation. If enough people get laid of in areas, and not many people are commuting, are they still going to run bus lines from areas in Morris co, somerset county etc. If they stop busses from running in certain areas I wonder how that will effect traffic patters becuase people may have to start driving
but the wife wants to wait!
I wouldn’t be at all surprised if JB buying a house makes the Star Ledger.
I can just see the Realtor propaganda now. “NJ Real estate bear buys house; local real estate expert at Century 21 declares bottom to downturn”.
#25 grim;sounds like my wife, “let them choke on their over priced dumps”.
grim Says:
November 12th, 2007 at 7:46 pm
Hard at work..
Example of a bigger lie than anything ever said by David Lereah…….slack on dude..
grim (25)-
On the day you cease being a bitter renter, is your cred here shot?
Homer,
Non issue, even the bears wouldn’t bet on that kind of armageddon.
Homer They would have to lay off an awful lot.As people are spread out over large area the impact would not cause mass trans to go into a funk.At any rate the price of gas ,global warming crap(o boy I’m going to get some heat for that)will force more public trans no matter the layoffs.At the least gov will not be able to cut back.
“We’re not going to buy until there is blood in the streets.”
I have no problem with that statement.
grim, can i hire you and your wife to represent me and my wife?
OT…last night, I sat next to a Comcast exec at a charity function.
He told me of an installer position they’d recently advertised. 80 applicants replied.
Of the 80 applicants, 43 failed the drug test.
What, if anything, does this say about the buyer pool for starter housing in NJ?
Reinvestor101
How about checking out this blog
http://www.stevepavlina.com/blog/2006/01/beyond-self-delusional-positive-thinking/
KL
Grim Renting & Clot have a point but you do what you have to do for you & yours.The market will still tank even if you buy.
Imho stay the course better for you.Listen to the wife.Makes life a whole lot better(over 20yrs trust me) & you safe $.No down side.
The market will decline 10% except in the SF Bay area and the NYC metro area. Otherwise, our area and the west coast will just stay flat for a couple of years.
Clot Know some bergen cty cops tell you some stories in upper saddle river you would not believe.Its all over & its a shame.Money doesn’t insulate from adiction.
#48 gary:It dropped before in our area, and it will/is dropping now, slowly of course, but it is/will.
No area is immune.You too will believe.
Gary [48],
When it does you better have some of mom’s eggplant ready. In addition to that, you pay for the wine.
What would be a good indicator of “blood on the streets”?
Blood On the Street – MOre homes for sale as REO than homes for sale which are still owned by original owner???
Gary 10% not going to do it.Short sales,foreclosures,inventory,new lending standard,20% dp needed,Wall Street in trouble,recession on the way.20 to 30 for sure.
BC 51,
And don’t forget the cannoli… but leave the gun.
reinvestor..you’re pretty forthcoming with your feelings about how things should be in real estate heaven.
How about telling us, finally (after a year and a half of popping in here to chastise the unfaithful), exactly what type of real estate you’ve purchased, the dates, and how you financed it?
It sure would help in giving us some context for your opinion. Otherwise, I’m just going to have to continue to think very little of you, based on my internet research of uses of screen name.
Oh, and it would save a lot of time and blog space every time you pop up.
“How about telling us, finally (after a year and a half of popping in here to chastise the unfaithful), exactly what type of real estate you’ve purchased, the dates, and how you financed it?”
Pat[56],
I was wondering the same?
Grim,
I have met many a client/customer who are well educated with regards to the market, and start out wanting to look and take their time, however looking at homes ( and being a realtor you look at so many) can sometimes make it hard to wait. I had almost been caught myself, many times, my current goal now is of course to wait & when I go to visit my brother and his wife ( she just gave birth to her second child) it reinforces my desire to buy a multifamily when my children are older. The market will have gone thru positive changes, housing will come back to affordable levels and the biggest plus is the ability to keep family together. My brother lives in a beautiful huge 2/family with an in-law suite in the basement. Great grandma downstairs, grandma,grandpa and great Aunt 1st floor and he, his wife and their 2 children on the 2nd. My nephew has a relationship with his grandparents that’s incredible. This is the thought my husband years ago and will continue to strive for this goal.
Allah familia!
KL
>>Countrywide said it funded $22 billion of home loans in October, down from $41.9 billion a year earlier, but up 4 percent from September. Adjustable-rate loan volume fell 81 percent from a year earlier to $3.1 billion, while subprime loan volume totaled just $42 million, down from $3.3 billion.
$3.3 billion to $42 million in funding subprime lending? wow.
er…KL..drop the “h” paesan
Hey Grim et al, I saw a 3-family in Montclair the other day, and the data I got from the recent reval seems odd. Maybe you can figure it out. House is a recently renovated huge victorian from 1898. Area is not nice and there is a housing complex of some kind with a few shuttered windows and all across the street. House OLP was 489 dropped to 449. Amazing thing is that its old assessment was 432K and the new one is 750K (new taxes are 15K) My questions are: how “normal” is it to buy a house assessed at 750 for 449? Would that be a surefire argument in the courts to get your tax assessment down? how could they assess that house so high?
DINJ Says:
November 13th, 2007 at 9:36 am
What would be a good indicator of “blood on the streets”?
DINJ: walk out of a building; look in the street; see blood; also the term is “blood in the streets”
gary, why do you think NY and SF are different?
I was in Boston over the weekend and people there will rattle off the reasons why Boston is different as well.
My friends who live in L.A. will give you a bunch of reasons why L.A. really isn’t as bad as you read in the papers.
There are attractive aspects about a lot of places. I do not see why NYC and SF have a force field around them. They are already at a huge premium to just about everywhere else (to compensate for the proximity to hightened economic activity that Pretorious always advertises). Other places are dropping; NYC and SF are too.
“DINJ: walk out of a building; look in the street; see blood; also the term is “blood in the streets”
Chi [63],
Just look for BOOYAAAA dancing to Glory Days.
ok here is something positive today. dow up 100 pts. financials on its third day in row positive even last friday and monday. as i said friday, the subprime drama is over (i wish not since i want the market forces ben cut more than 5 times.) oil got cheaper. everything looks great except srs: just down $3.7
40$ oil is next….
#62
If you decide to buy, get yourself an attorney to appeal the tax assessment. Having been through a tax reval a few years ago, I am seeing houses for sale in town that are listed below their assessments. Some of them have appealed and had their assessments reduced to the lower asking price. I also know of someone who bought in the early 90s after a reval that was done at the height of the market in the late 80s. She appealed her assessment and it was reduced to her purchase price.
The point is that the selling price is the market value – they have to recognize this. I know that friends paid $1,000 for a tax attorney so I would think that might be the cost for you in an appeal.
Here is an example of a house where they lowered the assessment because the house wasn’t selling. Unfortunately, the realtor didn’t bother to change the tax amount when they changed the assessment so it still has the old tax amount. The other thing about this house is that they were really robbed when the reval was done. The sale is an estate sale so I’m thinking the older woman who owned it didn’t have any guidance in appealing.
http://new.gsmls.com/public/detailLst.do?mlsNum=2433460
seems to me the prime areas continue to hold up fairly well considering. the old term applies you get what you pay for.
#62
Also, you could put a stipulation in the contract that the owner pay for the appeal at the contract price.
reinvestor101 (11)
I am thinking positive today. I am positive that I would rather rent than pay 2x as much per year to own the same thing. If prices drop another 35-50%, I am positive I will buy.
Where is TJ ? Is today the day ? Envelope please !!!
skep-tic 64,
A couple of months ago, I read three articles in the span of two weeks that stated the only areas with an exception to possible declines is the NYC area (including North Jersey) and the SF Bay area. And no, I don’t remember the sources.
Coupled with that, I receive listings on a daily basis and they’re not that far removed from peak 2005 prices. Also, there are two couples that we know who have been actively looking for a year and a half now; one was in two bidding wars and the others are simply disgusted at the prices being asked and cannot pull the trigger.
Third of all, whenever I see a house that APPEARS to be priced REMOTELY fairly and I inquire, it is either UC or in AR.
Richard 69,
I agree.
grim,
Can your wife hang out with my wife and talk some economic common sense into her.
Tutti(my wife) has no concept of value.
Marito #62 – I am a multi-family owner in Montclair. ASI (company who did the reval) did a terrible job assessing multi-families, especially if they were located in a neighborhood with single family homes. ASI’s “comps” to set our assessment were renovated single family homes. My husband and I are currently appealing our assessment.
“We’re not going to buy until there is blood in the streets.”
Wish my wife would think like that. She’s been itching to buy for the last two years and this wonderful site is the only thing that saved us from doing so.
Have pending home sales been released yet?
# reinvestor101 Says:
November 13th, 2007 at 7:37 am
Please. Please. Let’s just stop right here and think. Did anything good happen today or it everything gloom and doom all the time? Let’s be positive today. Positive thoughts will make good things happen. Try it and see!
They’re not making anymore real estate and owning it is a positive thing, not a negative thing. Think positive!
Been away for a while, stepping back into the frenzy now, but its good to see that some people are still supporting the crack market! :)
Hello All,
I’m new to this forum…love all the comments and insight! Sold my home in North Arlington this past July….we are currently cramped into our in-laws waiting for prices to drop. How would I go about finding out information on short sales of homes in/heading into foreclosure..We are interested in Monmouth county. Any help would be appreciated. Thanks!
What are we gonna do with this site in 2-4 yrs when we actually hit a bottom and everyone is out there scrambling for deals and setting up their unearned income for retirement.
Are we gonna go to connect and say we told you so? Is konnect gonna be extict when the hurds condemn real estate?
What is the future of this site when we all agree that we are at the bottom and streets are flooded with blood and BC looks like Sparta?
gary– but what about the big picture here? transaction volumes are way down from 2005. Inventory is much higher. Time on the market is much longer for the typical house. Clearly, asking prices on the whole are not being set realistically. My sense is that when the occassional house comes along with an owner who does price realistically, a bidding war results since there are so many buyers who are frustrated by the majority of sellers. But I don’t think you can take these exceptions as the rule
skep-tic,
I keep asking the same questions you do. I’m as frustrated and perplexed as the next person. I can’t figure it out. Lately, I’ve been trying pound the drum louder hoping to get the ball rolling in our favor.
Hey Willow, NJ Gator, thanks for the comments!
# Clotpoll Says:
November 13th, 2007 at 9:07 am
OT…last night, I sat next to a Comcast exec at a charity function.
He told me of an installer position they’d recently advertised. 80 applicants replied.
Of the 80 applicants, 43 failed the drug test.
What, if anything, does this say about the buyer pool for starter housing in NJ?
Clot,
I honestly dont know if that really says much. Most of the people i know in executive positions and people in finance, tend to dabble recreationaly in various illicit substances and it has no more effect on their daily effectiveness then a beer or smoke in the evening… although it is stupid to partake when you might be interviewing
“What is the future of this site when we all agree that we are at the bottom”
make [81],
Then we tell Tutti, I told you so.
Well when prices to come back down to a normal level like they did in 1997 when they were 50% off the 1980’s bubble, people need to be sensible when they buy homes. We cannot go crazy and start the bubble all over again. I think thats what happened. In the late 80’s early 90’s people got priced out of the market
and in 97 when prices were 50% off peak, people were able to afford homes and went kinda crazy with buying home. Causing this past bubble.
So listen to me my fellow prospective home buyers, we must not let this get out of control again. It will continue to be a vicious cycle if we do
#80
http://www.realtytrac.com
Gary, what towns are you tracking? I’ve seen many price reductions in Bergen County.
gary: prices will fall, even in this area. I know it is frustrating, but a couple of people looking, and getting outbid does not change that fact.
You or I cannot force people to lower their prices.
Unfortunately I believe there are only a handful of Realtors out there that are actively trying to educate their sellers as to the new reality.
But at some point, the sellers will have to give in, assuming they really do have to and or want to sell their homes.
One final point, I do not believe that there are lots of frustrated buyers out there, there are some.
But I think much of the demand has been pulled in over the last few years.
I think you have 3 types of buyers out there today First, the clueless clowns, who have no idea what has transpired in the market, until they try to get approved for the loan,and are declined.
Second,those who want to buy but cannot afford the prices using a traditional 10/20 down paymt, with fixed rate mtg.
And third, those who could afford to buy in this market, with a down pymt,and fixed rate mtg, but refuse to pay the asking prices, becasue one they are too high, and two they know prices will decline.
The desire may still be there with some people, but the urgency is not.
BREAKING NEWS
Bank of America to take a $3 billion pretax writedown on troubled debt securities, Dow Jones reports. More soon.
BofA says will inject money to support money market funds
Bank of America sees $3 Bln CDO pre-tax writedown in 4Q
bergenbuyer,
Most of Pascack Valley and Wayne. There is a ton of crap in that 400K to 550K range. And I mean it is crap. Anything decent above 550K seems to go quickly.
“and BC looks like Sparta?”
Lots of Inventory in Sparta ….:*)
http://homes.realtor.com/options/interimsearch.aspx?ctid=17812&typ=7
#93 Lots of houses in Oradell in the 550k range.
skep (64)-
Why has everyone’s memory been erased when it comes to NYC real estate?
There have been three distinct RE bust cycles (with Manhattan as the epicenter) since 1970. Each of them got gruesome to the point of NYC having both its long-term financial viability and quality of life brought into serious question. All three busts were residential AND commercial in nature, and all three featured prominent developers famously brought to the edge of ruin (Trump being the most conspicuous).
Today, it’s no secret that Macklowe is at the edge of the precipice. There are also serious deficiencies with other developers and syndicates that played the commercial version of the residential boomtimes game of taking short-term, inadequate “teaser” financing in a gamble that property values would rise, and a subsequent refinance would cover the financing holes at some later date.
Well, it’s pretty much a given that the “later date” isn’t coming, and that plenty of mortgagors- with millions of square feet that can’t be refinanced- are up against it.
How does the party continue when the underlying fundamentals indicate negative- and further declining- equity for the forseeable future?
Gary,
I live in the PV, but I’m tracking more homes in the Saddle River Valley so I don’t know the PV market as well. There have been two homes near me for sale for about a year now and they have been dropping the price, granted they’re both still crappy and overpriced, but they’re now below $400K and they started out mid 400’s.
It’s happening, much slower than I’d like, but it’s happening.
Have you tried making an offer? Some people are still ridiculous, but some people are serious about selling. I recently made an offer 24% off OLP. They came down 10%, then they came down another 5% and their realtor said they’d accept an offer 19% off OLP while they’re currently listed at 15% off OLP. I told them thanks but it’s still too high, I’ll sit and wait for you to come to me, so far they have and will continue to.
I’ve said it before on this site, if you don’t make an offer, many owners don’t realize they’re house is overpriced. You need to give them a basis, they’re asking X and have recieved 1 offer (yours for 25% off X), after 6 months of no other offers, maybe they’ll realize they’re priced wrong adn start dropping their price. It’s happened in every house I’ve bid on, give it a shot.
Have pending home sales been released yet?
3:00 PM
#90
i think you’re missing out on 1 other type of buyer: strong credit, documented income & assets but with little to no down payment (3% or less) which the GSE’s and FHA programs will allow. from there, you can break them down to two tiers.
1: those whom are 1st time home buyers that will tend to follow the heard and assume prices are what they are and pay at the inflated price.
2: informed buyers keeping tabs on the economy and thoughtfully strategizing on when to strike and not listening to the part time realtor that has no clue. AND can realize the benefit in renting just a tad longer (this would be me).
bi (66)-
Time to load up on more DUG. And…why not short SLB, CAM, RIG, NOV, TSO, CLB?
Since oil is gonna tank, all the solar plays will fade to black, so don’t forget to short WFR while you’re at it.
Go for it, big guy!
96#, this time is different – really different. in early 90’s, nyc was a rotten aaple. today nyc real estate market is lagging counterparties such as london, shanghai, sydney and mumbai. in early 90’s, friends of mine went to deliver pizza after getting Master or PhD degrees. today the unemployment rate is still all time low, interest rate is falling, foreign money is coming, productivity is improving thanks to internet…..
bergenbuyer,
Saddle River Valley – Do you mean western Woodcliff lake, Western Hillsdale, Western Wash. Twp, etc.? In other words, west of the Parkway?
make (81)-
This board will never reach a consensus that the bottom has been reached, because 60% of the posters here will never buy a house.
3b,
Go in some of those houses (550K) and bring a gas mask. Those houses should be around 400K… TOPS. And that’s pushing it.
100#, i am not a momentum guy but looking for value, right now value is in finaicals, homebuilders, pharmas. i will short more oil in every bounce. back to re.
Vodka (85)-
Agreed…at least, in the sense that Jimmy Cayne won’t be interviewing for an installer position at Comcast.
However, drug testing is part of the gig for a range of basic, good-paying jobs in NJ. What does it say when over 50% of the applicants for such a position can’t pass a drug test…when the requirement to take the test is a clearly-disclosed part of the application process?
Lady,
After all the insults you’ve hurled my way, you expect me to speak to you? After all the mean little comments, you expect me to talk to you. You’re way worst that Booya Bob could ever be.
Talk to the hand!!
Pat Says:
November 13th, 2007 at 9:43 am
reinvestor..you’re pretty forthcoming with your feelings about how things should be in real estate heaven.
How about telling us, finally (after a year and a half of popping in here to chastise the unfaithful), exactly what type of real estate you’ve purchased, the dates, and how you financed it?
It sure would help in giving us some context for your opinion. Otherwise, I’m just going to have to continue to think very little of you, based on my internet research of uses of screen name.
reinvestor101 (107)
Investing in real estate involves making money based upon cashflows that properties generate. Speculating in real estate involves hoping for price appreciation while accepting negative cashflows for holding properties. Is reinvestor the proper screen name or should it be respeculator?
reinvestor #11
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20071022/cancersurvival_071022/20071022?hub=Health
Skep-tic #64,
How do you think New York real estate should be priced, relative to other US cities, such as Philadephia?
bi (105)-
Warren Buffett is a value guy. He’s a value guy’s value guy. He will continue to prosper, even as the Street continues a long-term shift from a value approach to a growth approach. Value guys don’t pile into double-short sector ETFs and other bizarre instruments. Value guys don’t talk about their trades. They just watch and wait.
Does any of the above even remotely describe you?
25.25 (107)-
Think of Pat’s comments as a sort of tough love intervention.
Because you appear to be smoking something serious.
Clot 96#
Was the government _more_ willing to let the house market crash in those times then they seem to be at the moment? It seems like, if we wanted a crash type situation this time around, the government is going way out of their way (see inflation) to stop it from happening.
Your tone here has become increasingly more strident and it’s clear that you’ve gone over to the dark side and have fallen under the influence of housing militants like Pat and Booya Bob who are actually part of an insurgency to destroy the real estate markets.
There’s still some good in you. Don’t give into hate and loathing of those who have invested by trying to undermine the markets that have been wealth generators. Please turn away from the dark side of those who seek to do everything they can that’s inimical to the well being of this great nation and its real estate markets.
Richie Says:
November 13th, 2007 at 7:59 am
Please. Please. Let’s just stop right here and think. Did anything good happen today or it everything gloom and doom all the time? Let’s be positive today. Positive thoughts will make good things happen. Try it and see!
I’m definitely thinking positive. I’m looking to expand my real estate holdings soon and get some multi-unit buildings. The market is looking better every day!
They’re not making anymore real estate and owning it is a positive thing, not a negative thing. Think positive!
They are making new real estate every day, where they hell do you live?
#104 gary: They will be 400k, sooner rather than later.
Pretorious– I know what you are going to say. NYC is growing and Philly is dying, therefore, NYC should enjoy a growth premium above and beyond its traditional premium to Philly. This makes sense.
My response is that there are lots of areas of growing economic activity in the U.S. where real estate values are plummeting (e.g., Las Vegas and Phoenix). So growth is not the entire story, nor does the presence of economic growth make an area immune from a real estate downturn.
In addition to value relative to other areas, there is the concept of fundamental value, which is lacking in most real estate in most places today.
111#, warren buffett is great investor but he also talks a lot on his fx trades, petrochina, aig, salomon, …
the guy who made fortune but never talk is ned johnson of fidelity. the net worth of johnson family is probabbly bigger than warren buffetts holding
96#, this time is different
The four most expensive words in investing…
People have this perception of Manhattan that because it is desirable and because Wall Street is in Manhattan, that any price is justified. They sky is the limit. This is the most dangerous type of thinking in investing. Too many people have this idea that Manhattan is a “risk free” market; too big and powerful to see a correction.
Yes, Manhattan is different than it was in 1990. That very well may justify higher prices. However, just like anywhere else on earth, Manhattan is not exempt from the laws of economic fundamentals. Just like anywhere else, prices can get too high.
#103 clot: Those are storng word, No? What makes you think that so many here will never ever buy a house?
Reinvestor101
insurgency to destroy the real estate markets.
Please turn away from the dark side
I have 1 quesetion for you ….
When we had the last bubble that ended in 1997 and prices dropped 50% off the peak price, who caused that to happen?
Remember internet was not that popular and there were no blogs
#114 Luke, I am your father..Real estate is going to be crushed. Then Luke says, “NNNNnnnnoooooooooooooooooooooooooo”
Too late the dark side already has me. I’ll buy when prices drop a good 30% or more.
Also,
There are a lot of smart people on this blog reinvestor101, share with us you situation and I’m sure you can get a lot of good help from here.
italics off
And another $3 billion goes boom over at BofA
Justin (113)-
Gubmint much less willing to intervene in the past. RTC was much more of a mop-up operation than a bailout.
That’s why the current talk in DC is so troubling.
Simple. The liberals messed up the tax laws in 1986. Liberals don’t want to see money being made.
Homer Says:
November 13th, 2007 at 11:49 am
Reinvestor101
insurgency to destroy the real estate markets.
Please turn away from the dark side
I have 1 quesetion for you ….
When we had the last bubble that ended in 1997 and prices dropped 50% off the peak price, who caused that to happen?
Remember internet was not that popular and there were no blogs
3b (103)-
Because I’ve made a living for years by learning to separate lookers from buyers.
I’m not infallible, but I’m not bad at it, either. If I were bad, I’d have gone out of business long ago.
I stand by my original call. 60% of the posters here will never buy a home.
“reinvestor101 Says:
November 13th, 2007 at 11:56 am
Simple. The liberals messed up the tax laws in 1986. Liberals don’t want to see money being made.”
Liberals like Reagan and the Senate Republicans??
Clot 124#
I guess that’s why I don’t think we’ll see the type of drops people on this board want to see. It’s just going to be a VERY long stagnant phase, where the Gov does everything to make people currently in homes keep them. While also punishing people who have multiple investment homes with little to no return in the next decade.
#90 – I fall into your 3rd category. Dealing with FSBO’s are the worse. Hasn’t sold in his house in 6months. Refuses our offer..9% off his asking (and he doesn’t have to pay a realtor) and based on other houses in the neighborhood it was a reasonable offer. Fine with me, more to choose from in the spring and for less!
Clotpoll 126#
I have already been through two of them. Doubt I will ever do it again!
25.25 (125)-
Ronald Reagan was the President who signed off on that legislation.
And, I fail to see how eliminating pure tax sheltering- which was one of the main purposes of that legislation- is an exclusively “liberal” concept.
You, however, appear to be a classic liberal: one who feels entitled to ever-rising markets and profits…and one who squeals for gubmint intervention and handouts when Mr. Market decides to turn the other way.
“part of an insurgency to destroy the real estate markets.”
50.5 [114],
Did you recently apply for a job at Comcast?
Some talk about Montclair in the earlier posts. I’m thinking of moving from Hoboken to there in the next few months (renting).
I know there is a difference between “Upper Montclair” and “Regular” Montclair, but does anyone have experience in the areas around the Walnut St, Bay St, Glen Ridge area? Is it more akin to Hoboken or Jersey City or someplace in between?
I write this post with the fear that we get arguments like yesterday about Mexicans and the “right side of the tracks”, but I ask nonetheless…
Thanks,
Lincoln78
“…part of an insurgency to destroy the real estate markets.”
grim-
Time to change the name of the blog to NJ Real Estate Jihad.
I think it would boost your position in the search engines, no?
I stand by my original call. 60% of the posters here will never buy a home.
Clot
I do want to buy a home but I make a little less the the average household income of 65k.
I do not care about living anywhere close to NYC. I do want to live in a decent area with good schools which I do not think is a big thing to ask for. But unless prices come down to a level where I can afford, I will not be able to buy a home. As most people will not be able to afford.
If most people in NJ make under 100k who are these magical people that will be able to buy these houses at 10-15% off current prices? Commuters? They are only so many of them. Maybe I have missed something but who are these people that are going to be buying these places?
Simple. The liberals messed up the tax laws in 1986. Liberals don’t want to see money being made.
If the 1986 tax law was so draconian, then why did the dot com bubble even get started in the first place? What’s the point of bidding these stocks up if you can’t make any money on them due to a “liberal” tax law?
Clot #126:
I agree with your assessment. The tighter lending standards alone will keep most from having the ability to buy. How many people do you know that have $100K plus saved for the down payment? Even if homes drop 30%, I doubt those who inflated the bubble will have enough saved to start the cycle again. I have the money saved and the excellent credit to go with it so hopefully I’ll be in the other 40%.
reinvestor101 (125)
http://en.wikipedia.org/wiki/Paranoid_personality_disorder
Homer (135)-
This has nothing to do with price/affordability. Houses are going to become affordable again, mark my words. The corpse of this market is going to be bled dry, then hung from a bridge for a while.
This has to do with the difference between the desire to own a home and the desire to purchase an asset at the absolute nadir of its valuation. Just as there were those who ignored overwhelming risk in the up market, there are those who cannot step to the plate until and unless all risk is mitigated. That will never happen.
Two sides, same coin.
trader (138)-
$hit. I think I have paranoid personality disorder.
#25 grim
You married a good woman
(as an aside, so did I).
patient (141)-
Yeah, but is your wife holding you at gunpoint right now? :)
Just to cheer some people up (Gary)……
I’ve had my eye on the market out of NY commuter range in more rural areas and took a quick look today to see what inventory changes might have taken place in the past couple of weeks.
Suddenly seeing some properties on there where there is actual value. Still a bit high, but the sellers of these properties appear to be serious about selling. It made my toes tingle to see prices approaching my range on properties I could actually see myself living in.
It certainly gave me a lot of hope for next summer and bodes well for those of you looking in areas closer to Manhattan.
Clot,
Of the 60%, do you think most will rent forever or leave NJ?
I think 60% may be high. As for me, I’m not looking for an absolute bottom, just a price where I can get a home that I will feel comfortable in for many years (no starter homes) where I have a reasonable payment.
By this time next year, I plant to sh*t or get off the pot (get out of NJ). We are likely buying next year either way.
102 GAry,
SRV = USR, Allendale, Ramsey
“chicagofinance Says:
November 13th, 2007 at 9:52 am
er…KL..drop the “h” paesan”
and add a “g”
lisoosh 143,
It certainly doesn’t hurt to hear that. :)
bergenbuyer 145,
I love that area. Who doesn’t!! And I’d love to see a 20% haircut there.
[133] Lincoln78 Says: Upper Montclair is totally residential and utterly overvalued. Consider it the Beverly Hills of Montclair. We share all of the same services and magnet school system. Figure a 100 to 150K bump in cost for foofy-factor alone, compared to lower Montclair. Walnut Street (where I live) has a lot more retail, bakeries, dry cleaners, pizza places, etc., that you can walk to. There are very few Mexicans in Montclair. We have a much scarier demographic. Lots of ultra-liberals with too much discretionary dollars. Everything the government wants, the government gets. This leads to insane property tax increases and multi-family homes that assess for double their value. Of course your kids will play on a baseball field with better grass than Fenway. As you move further south and east through the town, it gets more urban. The southeast end is about as scary to nervous white folk as is downtown Jersey City. No area is as bad as Greenville or even as diversified as JC Heights. Bay Street is pretty much the South East Corner of Montclair. Let’s just say that most of the retail down there has lots of funny spellings in the store names.
Glen Ridge is property tax hell as they have zero ratables and a very upper crusty population. They have fantastic schools, but no diversification whatsoever. If you want your daughters to wear big fuzzy boots and $200 jeans, then Glen Ridge is for you.
So dollar-wise, Walnut street is a good bet. If you were willing to wait another year or two, I could probably rent you my unit of my two family at a very fair price ;)
Caveat, make sure the place you rent or buy is near the choo choo if you plan to commute to NYC. There is no parking available anywhere near the area unless you want to drive West to train east.
I hope this helps.
148 Gary,
There have already been 10-15% drops, some houses are still really expensive, but they’ve been that way forever. Don’t expect a house that sold for $600K in 2000 to sell for $400K in 2008. It may have gone up to $1.1M and that was too high, but seeing it come down to $7-8-900 is doable and is happening.
“Yeah, but is your wife holding you at gunpoint right now? :)”
LOL
Stu [149],
Have you ever gone here;
http://www.eganandsons.com/#
144
I’m not looking for the absolute bottom either, but I’d much rather miss it long than miss it short.
152 BC
I was just there with Mrs. Patient a few weeks ago – really terrific place.
#126 Clot: You may very well be right, soem will not be able to take any risk at all.
For myself, I have to be out of my sweet rental, by end of next year, as the long timer owner is selling both that and his residence, and retiring out of state.
I could get the rental I am in, for a very good price, but for a number of reasons would nto buy this particular house. So the next one I buy,will be somewhere I plan to be for a long time.
I am looking for that 25% or so off of 05 highs, if it drops another 10% or so, so be it.
Either way I have to be out end of next year, and do nto wnat to do another rental.
patient [154],
Yeah, I’ve been there a few times. Great joint.
gary Says:
November 13th, 2007 at 11:09 am
bergenbuyer,
Most of Pascack Valley and Wayne. There is a ton of crap in that 400K to 550K range. And I mean it is crap. Anything decent above 550K seems to go quickly.
________________________________________________
I had to spend a good amount of time in Wayne over the Spring in the area of the Police Academy up there, and I fear that town is going the way of Lodi–uncontrollable flooding. I would really be careful there.
Ramsey
SOLD 48 OAK RIDGE RD $435,000 4/23/2001
SOLD 48 OAK RIDGE RD $599,000 8/23/2004
SOLD 48 OAK RIDGE RD $575,000 11/12/2007
My wife is NJGator. She lets me know how depressed she is over the cost of housing about once per week. She’ll just say something like, “I’m depressed.” Of course I know she is just referring to our inability to entertain friends as our home lacks a dining room. When we bought our two family in Sept. 2004, we planned on making the next move in 5 years. Whether it was to sell or buy a second home, we wanted to wait until we were done paying $1,000/month to daycare. We also expected the bubble to burst by then. Well just one to two years to go and the timing is looking absolutely perfect. Although the great deal I got on our FSBO house will probably turn into a break even or maybe a slight loss, it still will end up having made more sense than renting our unit at $1700/month. In 30 years, when the 5.5% fixed rate mortgage is sold off, it will probably have been a very wise decision. I can’t wait to buy my next home (this will be the real one) so I wish for prices to drop. As much as I lose some value on my current home, I’m getting it back on the purchase of my 2nd home. It’s pretty funky to dollar cost average in to real estate.
I think reinvestor25.25 is a spoof. He’s not real. His writing patterns are too spoofish – no one who really wants to pursuade makes references to jihads and “the dark side” and “fallen under the influence of housing militants” and the real estate market can be improved through the power of positive thought.
There are only two possibilities: reinvestor25.25 is a complete nut, or he’s Boooyah making fun of the housing bulls.
Leaves open the possibility that he’s Duck.
hey stu – did your wife go to Florida U?
all this delusional talk is making me hungry. prices will most likely adjust a bit downward then stagnate for a number of years before starting to climb again. as long as credit dosen’t dry up entirely and the job market stays healthy there will be no big swings in either direction.
seems to me the coming out party on losses due to repricing is now PC and in full swing and should start to abate soon. the worst might be behind us but that won’t convince the glass is half empty and cracked crowd.
Clotpoll Says:
60% of the posters here will never buy a home.
If I’m still in Jersey next August I’ll be giving you a call as I’ll most likely be looking in your area. Not until then though for personal and market reasons
“as long as credit dosen’t dry up entirely and the job market stays healthy”
credit won’t dry up entirely and the job market will not “stay” healthy (it’s not that healthy right now, IMO).
patient [154],
I’ve never been to Egan’s but have been told that it is quite beautiful inside. Montclair is a real foody town, but I’ve hear their food is just so so and their beer expensive although good. It seems to be more of a pay for the atmosphere kind of place.
I’m more of a corner tavern kind of guy. If I’m gonna shoot the -sh*t, I want it to be about blue collar stuff. I could care less about the next Lexus being developed or any other Men’s Health Now or Maxim topic.
Now if you are looking for top notch eats, then I can recommend lots of places in lots of price ranges. I’ve lived all over Jersey and dollar for dollar, nothing tops Montclair. Sure, you can get great food in New Brunswick, but you’ll pay a pretty penny for it. If your food is not good in Montclair, you will close shop. Hoboken, by the way, has the most overpriced mediocre restaurants in NJ. You can get the same quality food and swill in any suburb for half the money. And you can park there too ;)
I hear you X…but then it is not easy to buy here…and unless you plan to stay 5 plus years, renting is the better plan. I bought….and don’t regret it — but you had better have somewhere in the neighborhood of at least $150k and more coming in and not a ton of debt or it is a lesson is tension and angst…..even then it is still that way.
stu – top 5 food places in Montclair?
hey stu – did your wife go to Florida U?
That’s what the NJGator is all about ;)
I went to the prestigious northern ivy that goes by the name of Montclair State. We had a great football team too. Too bad they were in division III.
I like the corner tavern places as well, stu, but Mrs. Patient not so much for dates.
….I like Cuban Pete’s…in Montclair.
stu – top 5 food places in Montclair?
Is cost a factor?
njpatient, don’t even try. You’ll drive yourself bonkers. In 2006, I used to look for word patterns to try to figure who was doing the spoofing.
I began to think reinvestor is an unemployed, bored soul from NJ who likes to chat and has received past attention from counter-culture outbursts.
Also, he’s probably of Italian heritage, 50-ish, possibly with straight hair and watches football on a little TV on the kitchen counter.
Uh,
Cuban Pete’s is all atmosphere. Their authenticity is questionable and when they’re busy, their service really suffers. The owner used to run Mexicali Rose (which now we call Mexicali blows).
I’m not real?? Then who’s typing my posts;a ghost? And you guys have the nerve to call me delusional.
You’re sorta new here. I’ve been here since the old days, so mind your manners young one. I’m calling like I see it and have been since day one I arrived here. Also, I never ever used the term “jihad”.
njpatient Says:
November 13th, 2007 at 12:51 pm
I think reinvestor25.25 is a spoof. He’s not real. His writing patterns are too spoofish – no one who really wants to pursuade makes references to jihads and “the dark side” and “fallen under the influence of housing militants” and the real estate market can be improved through the power of positive thought.
There are only two possibilities: reinvestor25.25 is a complete nut, or he’s Boooyah making fun of the housing bulls.
Leaves open the possibility that he’s Duck.
stuw6 Says:
November 13th, 2007 at 12:56 pm
Hoboken, by the way, has the most overpriced mediocre restaurants in NJ. You can get the same quality food and swill in any suburb for half the money. And you can park there too ;)
stu: don’t say that to pret-a-manger (a.k.a. the Weehawken Wind), he will try to stomp the life out of you…
“stuw6 Says:
November 13th, 2007 at 1:00 pm
stu – top 5 food places in Montclair?
Is cost a factor?”
No, but don’t leave out the best slop joint or family place (we take the kids when we go to the used book store).
I used to live in Tampa….ate a lot of Cuban food….and while C. Pete’s is not quite at that level, it has some nice dishes….
“and the job market stays healthy there will be no big swings in either direction.”
[162]
The job market is limping along. It would be much worse if we reported real jobs, not some phantom birth/death stats. By the way, why can’t the bls indicate where, states, these birth/death jobs are being created? They really do have to fine tune that b-box.
Richard Says:
November 13th, 2007 at 12:54 pm
seems to me the coming out party on losses due to repricing is now PC and in full swing and should start to abate soon. the worst might be behind us but that won’t convince the glass is half empty and cracked crowd.
reech: it ain’t PC…its good business…”kitchen sink”…write down assets that will accrete to maturity, and bingo, instant future (non-cash) profits….more smoke and mirrors….welcome to the game….same game as ever, new rules
That does it. I have a big screen TV, so we all now know that you’re no clairvoyant.
Lady, I told you once before that this blog is not big enough for the both of us. I respectly request that you refrain from posting here when I’m on the blog. Thanks you.
Pat Says:
November 13th, 2007 at 1:00 pm
njpatient, don’t even try. You’ll drive yourself bonkers. In 2006, I used to look for word patterns to try to figure who was doing the spoofing.
I began to think reinvestor is an unemployed, bored soul from NJ who likes to chat and has received past attention from counter-culture outbursts.
Also, he’s probably of Italian heritage, 50-ish, possibly with straight hair and watches football on a little TV on the kitchen counter.
“I’m calling like I see it”
50.5,
Maybe it would help if you cleaned the crap off your glasses??
“reinvestor101 Says:
November 13th, 2007 at 1:02 pm
I’m not real?? Then who’s typing my posts;a ghost? And you guys have the nerve to call me delusional.”
Nah – I just think that someone who wants to make real estate bulls look like idiots decided some time ago to go online pretending to be a real estate bull who’s an idiot. I am willing to acknowledge that you’re not pretending.
“You’re sorta new here. I’ve been here since the old days, so mind your manners young one. I’m calling like I see it and have been since day one I arrived here.”
I don’t think you get a pass for bloviating away here to nobody’s humiliation but your own just because you’ve been doing so for a very long time. “mind your manners”?!? People have a remarkable capacity for responding in kind; you’d better get used to it. The more you swing by here and talk to people as if they’re unreconstructed morons, the more they’ll speak an unkind word or two in your direction. You’re flailing, and it isn’t pretty.
“Also, I never ever used the term “jihad”.”
Yeah – you just said Pat was “part of an insurgency to destroy the real estate markets.” I guess you are sane after all.
Zagat on Montclair…..ranked by food rating…it seems this bunch is the top group…
CulinAriane
Fascino
Osteria Giotto
Aozora
Nouveau Sushi
Blu
O.K., reinvestor, think up a code word we can use so I know when you’re lurking or getting ready comment.
You think of that word really, really hard. It helps if you squeeze your eyelids really tight.
That way I’ll know not to post.
I’ve eaten at the sushi joints in montclair and would rather jump in the bimmer and head down to Tsuki’s in Bernardsville….better fish…less ‘atmosphere’ — I can’t get too excited about ‘cuisine’ in montclair…in fact the whole scene along bloomfield ave is sketchy at best…limited parking….seems like a lot of hoo-ha for nothing. My two cents.
“reinvestor101 Says:
November 13th, 2007 at 1:09 pm
That does it. I have a big screen TV, so we all now know that you’re no clairvoyant.
Lady, I told you once before that this blog is not big enough for the both of us. I respectly request that you refrain from posting here when I’m on the blog. Thanks you.”
Perfect example of a spoof post.
OK,
Best food, but quite pricey, are Culin Ariane French, (and I’m sure I butchered the spelling), and Fascino (Italian).
Best Asian, fair prices, Little Saigon (Vietnamese).
Best place for the kids and excellent prices, Marzullo’s (Italian). Get their individual pies or any pasta dish.
Best Indian, dirt cheap but vegetarian, Udupi. Service is unbelievably bad, but the food is really good and really cheap.
Best Ice Cream in NJ. Applegate Farms. Try Graham Central Station and you’ll never ever go to a chain again.
The best Chinese (and almost as authentic as China town) in a 10 mile radius is is Cedar Grove, Chengdu 1.
There is no good Mexican in North Jersey whatsoever. Check out El Meson in Freehold for that. I’ve spent a lot of time in Baja and nothing comes closer except maybe in Southern California.
Almost forgot, probably the cheapest, best and most unique place in town is Extraordinaire (they might have renamed it something stupid like . This is island food at it’s most authentic. Be warned though, they cook everything to order and I’m not talking Island Beef patties either. It’s like eating in a living room in the hood. Definitely worth trying if you like variety.
rent (144)-
What would the non-buyers do? That would be pure guessing on my part. However, the personality type of the “paralysis by analysis” crowd resists change, so I’ll say that the majority of non-buyers will remain here and rent forever.
OK,
Best food, but quite pricey, are Culin Ariane French, (and I’m sure I butchered the spelling), and Fascino (Italian).
Best Asian, fair prices, Little Saigon (Vietnamese).
Best place for the kids and excellent prices, Marzullo’s (Italian). Get their individual pies or any pasta dish.
Best Indian, dirt cheap but vegetarian, Udupi. Service is unbelievably bad, but the food is really good and really cheap.
Best Ice Cream in NJ. Applegate Farms. Try Graham Central Station and you’ll never ever go to a chain again.
The best Chinese (and almost as authentic as China town) in a 10 mile radius is is Cedar Grove, Chengdu 1.
There is no good Mexican in North Jersey whatsoever. Check out El Meson in Freehold for that. I’ve spent a lot of time in Baja and nothing comes closer except maybe in Southern California.
Almost forgot, probably the cheapest, best and most unique place in town is Extraordinaire (they might have renamed it something stupid like frontline). This is island food at it’s most authentic. Be warned though, they cook everything to order and I’m not talking Island Beef patties either. It’s like eating in a living room in the hood. Definitely worth trying if you like variety.
thanks, stu
“There is no good Mexican in North Jersey whatsoever. ”
This is sad.
Anyone been to Copper Canyon / Atl Highlands…..I need a review…http://www.newjerseyshorehotel.com/new-jersey-restaurant-menus.shtml
“This is island food at it’s most authentic. Be warned though, they cook everything to order and I’m not talking Island Beef patties either. It’s like eating in a living room in the hood. Definitely worth trying if you like variety.”
this actually sounds like my kind of thing.
Nonsense…..Great Mexican can be found in Boonton, NJ…..absolutely terrific place called….Chilli Willies….
Hoo-ha….
http://www.restaurantnewjersey.com/tequilas.php
http://www.restaurantpassion-nj.com/listing.asp?r=chiliwillies14
702 Main Street
Boonton, NJ 07005
Tel: 973-299-8775
Fax: 973-299-8738
Send This Page to a Friend
Primary Cuisine: Mexican
Serving: Lunch, Dinner
Reservations: Not Accepted, Liquor Lic: No
Atmosphere: Relaxed, Take Out: Yes, Smoking: No Smoking, Price: Inexpensive,
Established in 1988 Chili Willie’s is a Morris County favorite. Chef owner Jose creates traditional Mexican specialties using family recipes handed down from “Grandma”. Grandma lived in Texas when it was still Mexican territory. The recipes we use in our restaurant are the real “criolla” (native) Mexican food. The secret to maintaining the flavor of grandma’s authentic recipes at Chili Willie’s is preparing our dishes with fresh ingredients (no cans).
Experience real traditional Mexican food. Eat fresh, eat at Chili Willie’s!
Essex,
Parking is a problem in Montclair if you are not willing to walk about a block or two. 2 blocks north and and south of Bloomfield Avenue provide you with unlimited parking. Compare that with Hoboken, Jersey City or Manhattan.
There is no good sushi in NJ (IMO).
Anyone try Akbar in Edison or Moghul?
I have a reservation for Passione next Wednesday for dinner.
stu…..make a run to Chili Willies….
I’ve had some decent sushi here in NJ…
patient (190)-
All the Mexicans who can boil water are working in those foo-foo places in Montclair.
I will try Chilli Willies and report back Essex. Unfortunately, your review of Cuban Pete’s scares me a bit, but I am willing to give you a second chance ;)
Of course, most of our nation thinks the Outback is a 5-star joint, so who knows.
Personally, I love the Waffle House!!!
People who enjoy basic Mexican food and speak basic Spanish should check out Mexico Lindo on Park Avenue in Union City. Menu is bilingual but staff isn’t.
Atmosphere inside feels like Mexico too. And I’ve spent a lot of time in Mexico City so have an idea what I’m talking about.
Mexico Lindo is a casual neighborhood restaurant. Not a place I would go if I wanted to impress the people I was with.
ChiFi (191)-
Sucks.
The job market just has to stay healthy, in that it just has to create jobs, does not matter what kind, or how much they pay, just as long as jobs are created.
This is the kind of mindless rhetoric, that passes for informed discussion.
Ha! You are funny….OK, give the chipolte a chance….the cowboy chipolte chicken I think he calls it….it IS amazing…You have to believe me here….I’ll take your critique of Pete’s in stride and agree with you on the slow service….remember I said Pete’s was ‘decent’….and much prefer the Boliche at the Columbia in Tampa….
Clotpoll [198], not true. All of the Mexicans in Montclair are landscaping and making a bloody fortune. The town recently made it illegal to rake leaves into the road. They must be placed into those huge paper bags. I swear this was another liberal decision by our great local government to do our part to support the Mexicans. I do my own yard work, which is probably my greatest loss leader in intelligent use of time. Well, that is, besides reading this blog.
Extrordinaire is now called Future Line. In addition to making authentic Jamaican eats, they make some of the most amazing vegetarian food around!
Culinariane, Fascino and Osteria Giotto are definitely tops for food.
For breakfast food, most folks rave about Raymond’s.
Go Gators!
25.25 (180)-
“That does it. I have a big screen TV, so we all now know that you’re no clairvoyant.”
Did you buy that big screen by doing a cash-out refi on your home?
Dear njpatient,
I see that you are yet another person that’s been taken in by the dark side, hence joining Pat, Richie, Booya Bob and others. Your hate and loathing for anyone who doesn’t share your opinion is palpable. You’ve only been here a short time, but somehow you’ve gotten radicalized very quickly. I regret that I’ll have to add you to my “talk to the hand list” You’re not permanently consigned to that list and it is possible for you to get off that list with two actions:
1) Cease and desist with negative talk about real estate.
2) Buy a house in the near term.
Don’t be like the others. They’re too far gone to save while you have a chance to change course. Let me know when you’re ready to comply. Of course, if you’ve any questions, just post them here and I’ll respond.
Sincerely,
R.E. Investor
njpatient Says:
November 13th, 2007 at 1:15 pm
“reinvestor101 Says:
November 13th, 2007 at 1:02 pm
I’m not real?? Then who’s typing my posts;a ghost? And you guys have the nerve to call me delusional.”
Nah – I just think that someone who wants to make real estate bulls look like idiots decided some time ago to go online pretending to be a real estate bull who’s an idiot. I am willing to acknowledge that you’re not pretending.
“You’re sorta new here. I’ve been here since the old days, so mind your manners young one. I’m calling like I see it and have been since day one I arrived here.”
I don’t think you get a pass for bloviating away here to nobody’s humiliation but your own just because you’ve been doing so for a very long time. “mind your manners”?!? People have a remarkable capacity for responding in kind; you’d better get used to it. The more you swing by here and talk to people as if they’re unreconstructed morons, the more they’ll speak an unkind word or two in your direction. You’re flailing, and it isn’t pretty.
“Also, I never ever used the term “jihad”.”
Yeah – you just said Pat was “part of an insurgency to destroy the real estate markets.” I guess you are sane after all.
When my housing outlay is in the region of 25-28% of 1 earning member in a household, I will buy. This will be a function of various factors, primarily down payment, house prices, property taxes.
After I buy, PITI and sundry house payments should not detract from funneling away money for retirement and kid’s 529. I think many people bought thinking that equity appreciation from house would compensate for not contributing to their 401ks and IRAs.
Assessing risk is knowing when to take chips off the table and hedging the downturn to whatever extent possible. By sidestepping the current RE downturn, many here have so much more capital to deploy at a later stage. You are buying while others are selling, because there is a finite limit to sellers carrying negative cash flow property.
Buying only to see another 10% decline or buying after a 12% rebound off the bottom will not matter to me. The fact that I will have avoided a major leg of the peak to trough drawdown is what matters.
My 401k is in guitars…….(j/k)
grim-
Is reinvestor Booyah Bob?
stuw (199)-
Where I’m from, Waffle House is Michelin 3-star.
Couples have been known to come in and order the steak on birthdays & anniversaries.
The “steak”, BTW, resembles a catcher’s mitt.
And, there’s nothing as exciting as watching two drunken rednecks duke it out in a Waffle House parking lot.
pretorius Says:
November 13th, 2007 at 1:29 pm
Atmosphere inside feels like Mexico too. And I’ve spent a lot of time in Mexico City so have an idea what I’m talking about.
pret-a-manger: the litmus test for a good mexican restaurant is whether it is so authentic that you are afraid to drink the water….
I can attest to Chilli Willies being a GREAT mexican restuarant. I work in Roseland and we go there once a week.
The food tastes great, the service is excellent, the portions are huuuuuuuuuge. Its really a great place.
Heck I’m afraid to drink the water anywhere in Northern NJ…….just saying.
Why does everyone think that I’m someone else?
Just accept me for who I am. I’m a American who loves this country, believes in this country and who does not wish to see his fellow Americans harmed financially. It’s just that simple.
Clotpoll Says:
November 13th, 2007 at 1:48 pm
grim-
Is reinvestor Booyah Bob?
A man with black teeth once offered to buy me breakfast in a Gainesville Waffle House once. It is one of my fondest college memories.
A man with black teeth once offered to buy me breakfast in a Gainesville Waffle House. It is one of my fondest college memories.
“pret-a-manger: the litmus test for a good mexican restaurant is whether it is so authentic that you are afraid to drink the water….”
Mexico Lindo is a good Mexican restaurant using that standard.
By the way, the silly nicknames are very annoying.
Clotpoll Says:
November 13th, 2007 at 1:52 pm
And, there’s nothing as exciting as watching two drunken rednecks duke it out in a Waffle House parking lot.
clot: I say there is nothing more scary than scooting up 31 past Washington into Oxnard, hanging a left to go golfing, and seeing home after home with Confederate flags!!
…make that Oxford
pretorius Says:
November 13th, 2007 at 2:00 pm
By the way, the silly nicknames are very annoying.
Weehawken Wind: isn’t that the point?
My 401k is in guitars…….(j/k)
I’m 100% ultrashort Bi
R.E. Investor,
I think many of us here would benefit greatly from getting a better understanding of where you are coming from. Do you currently own investment properties?
>>This is the kind of mindless rhetoric, that passes for informed discussion.
lol mindless rhetoric describes you to a tee.
Portrero Grill in Hackensack used to have decent Mexican before they burnt down, but now that they’ve relocated and are sharing a space, their service has gone to hell.
ChiFi (220)-
Forget, hell!
BTW…that area is an active KKK hotbed.
Oxford, Oxnard…Is there really a difference?
Juanitos in Red Bank was good, a lot of people didn’t like it because it was authentic, not tex-mex. Not sure if it is still there.
#33 Ann – good point. Not too many articles or blogs are pointing the finger at them other than wehn news comes out from the NAR. They have a part in this and many are in collusion with the brokers. As noted in the book “Freakanomics” realtors will lower the asking prices when the paychecks stop coming in..
Skeptic #116
My response is that there are lots of areas of growing economic activity in the U.S. where real estate values are plummeting (e.g., Las Vegas and Phoenix). So growth is not the entire story, nor does the presence of economic growth make an area immune from a real estate downturn.
vegas and Phoenix are dying ciites. They do not have enough water as is and the criticality of the situation is just starting to hit the MSM. Those cities rely upon water sources that are tenuous at best. There are a lot of articles on the situation if you look around the web, but those cities are going to hit the wall in the next 5-10 years as they run out of water.
who needs a new job to support that subprime mortgage
http://tinyurl.com/24djh2 (NSFW)
A bit out of the way but Casa Maya in Meyersville has outstanding Mexican food. The place is small and can get extremely crowded but we go on the off hours and it has been really good every time.
reinvestor
“I regret that I’ll have to add you to my “talk to the hand list””
That’s ok – I usually don’t spend time on men who use the phrase “talk to the hand”.
“Cease and desist with negative talk about real estate.”
I’ve NEVER said anything negative about real estate! I’m forward-looking and positive-thinking, and I’m loving the fact that housing is becoming more affordable for me and my fellow Great Americans.
“Buy a house in the near term.”
Did you buy a house? Perhaps if you tell me how well that has worked out, I’ll get interested.
“Let me know when you’re ready to comply.”
hooo-boy – are you going to waterboard me?
vodka (231)-
Then, they can do a remake of “Chinatown”.
Man with Knife (Roman Polanski): “You’re a very nosy fellow, kitty cat. Huh? You know what happens to nosy fellows? Huh? No? Wanna guess? Huh? No? Okay. They lose their noses.”
I’ve been posting on here for years and you claim to “not know where I’m coming from”? You want me to post my personal financial statements here so you can know “where I’m coming from”?
That request is irregular at best and intrusive at the very worst. You already know where I’m coming from. Here is my primary platform, which I have repeated numerous times:
1) There is a confluence of factors, mostly conspiratorical, that have upended real estate markets.
2) Real Americans support this country and its markets. Whether right, wrong or indifferent, it’s America first above all. You’re either for America or against it. There’s no inbetween.
3) They’re not making any more real estate. It’s still a good investment.
4) The Federal Reserve and the government have not moved quickly and far enough in response to the credit market dislocations. Interest rates need to be dramatically lower and if necessary, new mortgage products need to be developed.
RentinginNJ Says:
November 13th, 2007 at 2:09 pm
R.E. Investor,
I think many of us here would benefit greatly from getting a better understanding of where you are coming from. Do you currently own investment properties?
Ladies,
I have a couple of people who advised that I shoudl short the leaders of the record company industry. They seem to believe that as an industry they are a dinausour.
They are all doomed and their business models are now absolete.
Any thoughts?
Reinvestor,
I thought mortgage interest rates is in historical lows and it’s a good time to buy. That’s what my realtor told me. Why does the government has to lower interest rates further?
reinvestor101:
R U 4 real?
$2,000 for a house in Detroit..just passed by CNBC, Foreclosure auction in Detroit…..lady paid $2,000 for a house! May not even be a good deal!!??!
“hooo-boy – are you going to waterboard me?”
That’s not torture and yes, the thought did cross my mind, so just watch your step and comply.
12.125 (236)-
“There is a confluence of factors, mostly conspiratorical, that have upended real estate markets.”
My apologies to Booyah for thinking reinvestor could be you.
Judging from the sentence above, reinvestor is clearly Gomer Pyle.
And, as to those “conspiratorical” factors, would “those” people be the Jewish cabal who control all the banks, politics and media?
Dear Reinvestor
People don’t take you serious because you blurt out stupid nonsense like blame the liberals or who stay away from the dark side blah blah blah. I have not seen one decent post from you. You talk all this smack about buying now, but you have not proved to anyone how the average household in NJ that make 65k give or take can afford?
50 year mortages? I/O mortage, ARMS…and we see whats happened with that. People payment increasing to level the cannot afford. Thats why there are Forclosures out the wazoo. Most people like myslef go by 2.5 time your income for a home
So for the average household in NJ thats 2.5
162,500.00.
You can sit and blurt out all kinds of crap like spend 10 times your income, but like me most people that eventaully would like to buy a home go by the 2.5 rule.
So you can say till your blue in the face to buy now, but it won’t happen. And you have not proven to any of us why now is a good time to buy. Its the worst time to buy.
Like I have said before I like to hear both sides of an argument but if your gonna blurt out illogical nonsense than you might as well go sit in the corner in a circular room.
Reinvestor-
I’d take a waterboarding over having to continue to read your drivel.
87 (240)-
Might not be a good deal…especially if all the copper’s been stripped out.
Reinvestor #241
I prefer whips and chains, can we work something out ( cat-0-ninetails perhaphs?)? i have tried water boarding and it didnt really work for me….
#236
(1) There is a confluence of factors, mostly conspiratorical, that have upended real estate markets.
ever heard of supply and demand? or perhaps Econ 101
2) Real Americans support this country and its markets. Whether right, wrong or indifferent, it’s America first above all. You’re either for America or against it. There’s no inbetween.
I like the way you think comrade all hail the father land!
3) They’re not making any more real estate. It’s still a good investment.
Really? i could swear that i drive by several condo construction projects everyday…. I must be hallucinating.
4) The Federal Reserve and the government have not moved quickly and far enough in response to the credit market dislocations. Interest rates need to be dramatically lower and if necessary, new mortgage products need to be developed.
May i suggest you do a little historical reading on Germany in 1923 and japan in 1989….
I am all for reasonable discussion but if ever there was a time when grim needs to add a block to an IP on this website it is now. If you can’t offer competent discussion material then why bother writing at all?
Can someone tel me what happened to this listing? Grim told me it had been reduced from $769 to $599 and had been on the market for about 200 days when it dropped off. Thanks.
MLS# 2393905
Thanks Stuw for the feedback.
Probably moving in June. I’m 29 and not looking to set down roots just yet, but feeling out the burbs while i’m transient (read: renting), so I’m not so worried right now about the town for my kids.
My bro went to Montclair State but he didn’t venture outside the local college basement for his entertainment (read: pounding Nattie Light), so he’s not much help.
What are the going rents for a 1br in the Walnut St area?
Cheer up friskie eaters.
3:00 pm : Just reported, the National Association of Realtors Pending Home Sales Index for September grew by 0.2%. A decline of 2.5% was expected
#225 Richard: Did I touch a nerve there grasshopper?
It was just a comment I posted after reading a snipet on CNBC where some real estate expert said as long as the job market stays healthy, real estate will be OK.
The typical sound bite that makes the typical uninformed Ameican feel OK. Just keep repeating it, do nto nalyze the comment, just repeat it.
Why you felt the need to attack what I posted, I do not know. Buyers remorse I would assume.
#251…Cheer up friskie eaters.
++++++++++++++++++++++++++++++++++
Ramen is my cheap food of choice.
“reinvestor101 Says:
November 13th, 2007 at 2:47 pm
“hooo-boy – are you going to waterboard me?”
That’s not torture and yes, the thought did cross my mind, so just watch your step and comply.”
LOL
Anyone who still thinks 25.25 is real, please let me know.
The last comments by Kettle and Homer put a fork in me. I’m “done” trying to respond to these attacks.
You won’t have me to kick around anymore. Goodbye.
Re the job market
The job market is not healthy. The numbers that are reported by the government are calculated using a formula that “assumes” a high percentage of the jobs is says were created. I posted on this a week or so ago when the new job number came out. If i remember correctly they stated somethin glike 165K new jobs. The NY Times then put out an article discussing how that number was calculated and that only about 30K of the jobs were actually verified and the rest were assumed to exists with no supporting data. The NY Times actually modified their news story to shade over that pint later in the day….. I guess they didnt want the sheep to question there numbers….
Yun said a $10,000 downpayment on a median-priced home, at a typical appreciation rate of 5 percent, would be worth $110,000 after 10 years. That same amount invested in the stock market for the same amount of time, assuming 10 percent annual appreciation, would be worth $23,600. “That’s why housing is the best long-term investment most families ever make – the longer you own, the better your investment,” he said.
This is such a wonderful combination of lying and sheer insanity, and praying no one asks questions. 5% a year is BETTER than 10% a year, 5 times better. Wow, I should have gone into accounting so I could understand this, unfortunately all I can do is count and add real numbers.
From the NAR release on pending sales
Yun said a $10,000 downpayment on a median-priced home, at a typical appreciation rate of 5 percent, would be worth $110,000 after 10 years. That same amount invested in the stock market for the same amount of time, assuming 10 percent annual appreciation, would be worth $23,600. “That’s why housing is the best long-term investment most families ever make – the longer you own, the better your investment,” he said.
This is such a wonderful combination of lying and sheer insanity, and praying no one asks questions. 5% a year is BETTER than 10% a year, 5 times better. Wow, I should have gone into accounting so I could understand this, unfortunately all I can do is count and add real numbers.
Nj patient…
what dies the 25.4 mean in your post, i keep seeing this in others posts….
“Anyone who still thinks 25.25 is real, please let me know.”
“Anyone who still thinks 25.25 is real, please let me know.”
As I was on the way out the door, the above statement came in.
My name is reinvestor101, or Mr. Investor to you. It is not 50.5, 25.25 or 12.5.12.5. I’m real as anyone here.
Teaneck
SOLD 721 LARCH AVE $410,000 5/7/2004
SOLD 721 LARCH AVE $469,900 2/28/2006
ACTIVE 721 LARCH AVE $399,000 11/13/2007
Somebody is bullish on New York job market. Empty office building selling for $500m, or $800 per sf.
http://www.altria.com/investors/02_00_NewsDetail.asp?reqid=1077115
From the NAR:
“The Pending Home Sales Index for September rose 0.2 percent to a reading of 85.7 from an index of 85.5 in August.
It was 20.4 percent lower than the September 2006 level of 107.6.
The PHSI in the Midwest rose 5.4 percent in September to 82.3 but is 14.4 percent below a year ago. In the South, the index increased 1.5 percent to 99.3 but is 19.7 percent lower than September 2006. The index in the West slipped 0.1 percent in September to 80.5 and is 25.6 percent below a year ago. In the Northeast, the index dropped 10.1 percent in September to 69.5 and is 23.1 percent below September 2006.”
Is the fact that the Pending Homes Sales Index is down 20% from Sep 2006 good news or bad news? It seems bad, but the market rallied…I know, it could have been worse, so buy buy buy.
I heard one of the NAR ads this morning with testimonials from satisfied customers, one guy who was relived he bought now, or else he would have missed out. On what? Missed out on WHAT?
I can attest to Chilli Willies being a GREAT mexican restuarant. I work in Roseland and we go there once a week.
The food tastes great, the service is excellent, the portions are huuuuuuuuuge. Its really a great place.
I will 3rd Chilly Willies.
I used to live up the road from the place and I always liked it. Seems like more of a city place that got dropped into the suburbs—big portions, reasonable prices, small tables.
Missed out on WHAT?
on being a bag holder?
266 njrebear
on being a bag holder?
So true – and that is why they don’t finish the sentence.
From MarketWatch:
September pending home sales index tumbles from yr-ago: NAR
An index of contract signings on existing homes fell to 85.7 in September — a steep drop from the year-ago reading of 107.6, the National Association of Realtors reported Tuesday. September’s reading was up slightly from the prior month, while Wall Street analysts were looking for a decline of 1%.
Seriously, bottom will be spring 2009. That is the time to buy. For real. Keep crunching the numbers, clipping the coupons and eating that ramen until then.
From Bloomberg:
Pending Sales of U.S. Homes Unexpectedly Rose 0.2%
September’s increase follows the biggest back-to-back declines since record keeping began in 2001. Stricter lending standards and falling home values will continue to limit sales in coming months, restraining construction and economic growth.
“It looks as though the credit dislocation was the most serious in August, which certainly dragged sales down to an unsustainably low number,” said Ryan Reed, an economist at National City Corp. in Cleveland, who forecast the measure would increase 1.5 percent.
“Existing home sales might have some more downward momentum to come.”
…
In a separate report, the Realtors group lowered their sales forecast for an 11th time this year. Sales of existing will fall to 5.67 million this year from 6.478 million in 2006. Purchases of new homes will fall to 796,000, compared with 1.051 million last year.
The median price of an existing home will probably fall 1.7 percent this year, the group also said.
More at the link above
stock rallies. commodity bubble starts to burst. financials and homebuilder lead the way (brother Stu, check out srs – sorry for bad news). today is the start of regular holiday rally. fast your seat belt. another rate cut seems not necessary. we had good show of subprime. now it is the time to grab some real estate bargains.
Homer, what is your problem with commuters? I work in the city a few times a month (my main office is in Morristown) and the average, everyday commuter I see on buses and trains are middle-class people like you and me, not rich, just people trying to make a living. All the big shot Wall Street commuters I know drive their Lexuses, Escalades and BMWs into the city – is that what you’d rather see? All these commuters driving into the city and clogging up our highways even more than by using public transportation? Or do you just think everyone that lives in NJ should work in NJ?
NAR is the best forecaster in the world. 3 weeks ago, they knew today is the good day to release bad numbers.
Confession: I work 2.5 miles from my house….Yes, I suck.
At the bottom of the Bloomberg piece (click on the link at 270 as there is more to the article than what I pasted)
The growth in the rate of cancellations, the decline in new contracts and the weakness we observed in October suggest that we still have tough times ahead,” Robert Toll, chairman of Toll Brothers Inc., said on a conference call Nov. 8.
The cancellation rate at Toll Brothers, the largest U.S. luxury homebuilder, reached a record in the fiscal fourth quarter, the company said. Revenue fell 36 percent and Robert Toll said the environment is “worse” than during the last housing recession in the late 80s and early 90s.
275#, in the same conference call on nov. 8, bob toll gave nyc metro area highest grade B+ v.s. overall F- nationally. real estate is local.
Tolls grades are for HIS properties, not the market overall.
I work 3 miles from my house… when I work in Morristown, which is 90% of the time.
277#, but don’t you think it is a good sample, especially for high-end?
BI,
My SRS is a hedge. I made more off of my CMG than I lost on SRS today. Of course everything else is up nicely as well. I am well diversified between short and long. I see the economy and earnings headed into the crapper. You seem to think we are on the edge of the great leap forward. It will take years, not hours, to determine who is correct.
But don’t worry BI, I’ll tell you when I remove my hedge.
And I don’t think for a minute that the liquidity issue is over. I think it is just beginning.
As I constantly repeat and you continuously ignore…one can not make a call after a day, a week or even a month. Sometimes, not even after a year.
Cheer up friskie eaters.
3:00 pm : Just reported, the National Association of Realtors Pending Home Sales Index for September grew by 0.2%. A decline of 2.5% was expected
Don’t be so quick to put away those tuna and liver treats just yet.
Pending sales were down 10.1% in the Northeast
Kettle1,
Phoenix is not a dying city. It is one of the best governed places in the country, and the leaders and residents want the city to expand.
Just look at the highway infrastructure. It has grown in line with population growth, and they didn’t put in tolls to finance it. Instead, Phoenix voters approved a sales tax that must be used for road building.
Contrast that with our state. Toll roads are everywhere, the transportation fund was looted and is now broke, and sales tax was increased unilaterally by the government, without voter approval.
In addition, there is no water shortage in Phoenix. Commercial farming areas still dominate the western and southern parts of the metro. Cultivating land in the desert uses a lot of water. As suburban sprawl advances, farms are converted into residential neighborhoods, which use less water.
“Cheer up friskie eaters.”
Sean [251],
Sales were down 20% yoy. Very ominous, at least to me, in an environment of declining prices. What report were you reading?
I think that it is the elderly who consume friskies….but then that is probably another blog.
Or do you just think everyone that lives in NJ should work in NJ?
Finally someone who understands. Live here and work here is the way it should be.
People can say things against that but think about it
People get our priced of NYC and moved to Bergen county, morris, hudson etc. The people who work there get pushed out and have to move out further. People in NJ get pushed out to PA becuase they cannot afford NJ anymore. Then the push people further out into PA. Its a viciuos cycle.
If we say live here and work here, and stop electing people like corzine and put someone in office who will make a diffence and pass laws that will help NJ I think we will be ok.
Plus encorage more small busniess to come to NJ. They dont ask for handout like the big greedy corporations like J & J
Casa Maya in Meyersville also has a location in High Bridge at the train station. Good food, cheap, great portions.
Noone speaks a lick of english, but who cares… just point at the menu to what you want.
I have to go to Wallington Area for Thanksgiving day, would like a place we can dine at, doesn’t have to be Turkey, can be ethnic…any ideas?
I was hoping to buy a 2nd home soon for investment, but business went slow and we’re gonna just stay low.
In 2000, we bought 6 acres in Hunterdon with crap 200 yr old house that we’re fixing up…paid 199K. I thought we’d NEVER lose our purchase price, but just last night I chuckled to myself, I may even see my house value dip below what I paid for it.
FWIW, I love living in my home. I can re-wait out the bubble for another 20 years. I’ve got my horses at home, my ornery but beloved goat, my cats, my husband (and best friend) and some really great neighbors.
Sometimes a house is a home.
275#, in the same conference call on nov. 8, bob toll gave nyc metro area highest grade B+ v.s. overall F- nationally. real estate is local.
He did not give the entire metro area a B+.
He gave the Pocono’s an F –
New Jersey a D
Jersey City & Hoboken a B +
This is actually quite consistent with the theory that housing bubble collapses follow a geographical patters starting in the exurbs and moving in toward the city.
http://www.itulip.com/housingpriceregionscascade.htm
bi,
#279
Being that this is a Northern NJ centric blog, I’d have to say no. When the total number of available units in 6 NJ counties (Bergen, Passaic, Morris, Hudson, Middlesex & Monmouth) is only 20, the sample size is too small to make a conclusion.
#286….I hear ya — in fact I have a mentality that seeks to preserve ‘what I have’ as opposed to say…more, more, more…that speaks volumes for a mindset based on accumulation and having ridden out a storm or two, fearful/conservative about the future.
Lincoln – That will probably run about $1200/month. I would check with local realtors.
Our neighbors are renting their 3rd floor studios usually for $800 – $900 month.
There’s also the heating issue. Not all leases include the heat. These are mostly 80-100 year old homes, so if you are paying your own heat, that could get costly.
Sorry I can’t be more helpful, but our units are both 2-3 bedrooms.
Homer – My husband recently left his NYC job in the city and is between careers. I am PRAYING that he does not get a job in the city again – I figure he could make $20K less a year and we’d still break even, between commuting expenses, taxes, lunches, etc.
On another note, we are leaving our cramped, 2-bedroom, 1-bath rental for $1550/month to move to a 4-bedroom, 3-bathroom house around the block for $1900, which is priced VERY under market for our neighborhood. We are THRILLED! The owner of the house says we can stay there for as long as we like – she is in no rush to sell the house and says she raises the rent based on property tax increases only. As I mentioned in a post earlier, I drive 3 miles to work so this is fabulous news and my child can stay in the same school.
I shared this info with two of my co-workers who bought houses in the past year. They think I’m crazy for renting – even though I have an easy commute and they travel from Hunterdon and Sussex counties from their overpriced, rapidly depreciating houses and come in to work aggravated by the traffic every day – and they think I’m the one who is nuts. So now we can save, save, SAVE and wait until there is “blood in the streets!”
No discussion on Goldman Shorting Subprime??
http://blogs.marketwatch.com/greenberg/2007/11/goldmans-shorting-of-subprime/
292…Impressive…..I’ll bet Corzine is stoked…..they were up big time today.
#286 Sometimes a house is a home.
A house is always a home, its just so much better when you do nto overr pay for it (not directed at you, just my comment).
“No discussion on Goldman Shorting Subprime??”
Is 50.5 still kicking? Let’s hear his/her take on Goldman, those anti-American’s. Hard to belive that they would short this market.
That’s believe.
re 236: I know I’m shadowboxing a spoof — or possibly a spoof of a spoof — but this has to be the most inane expression of “patriotism” I’ve ever read. And I read Steven Hayes’ “Cheney.”
RE101: “Real Americans support this country and its markets. Whether right, wrong or indifferent, it’s America first above all. You’re either for America or against it. There’s no inbetween.”
So if I choose not to subsidize incautious RE investors, I’m Osama’s fluffer? Kind of a leap there, no?
Bravo.
230 Househunter
From what I see as just an average person trying to do a buy and a sell right now, the realtors are playing a huge part in sellers keeping these ridiculous prices.
I guess, like you said, at some point, they will be making so little money they will be running around telling people to drop, drop, drop the prices!
A lot of them that I have chatted with are now into “The Secret”-type positive thinking. If you go stroll through Active Rain, you’ll see lots of that. It’s scary how delusional many of them are right now!
Homer Says:
November 13th, 2007 at 4:25 pm
Or do you just think everyone that lives in NJ should work in NJ?
Finally someone who understands. Live here and work here is the way it should be.
________________________________________________
Except that I live in Bergen, and my commute was 100 times worse when I went to school in Newark, and worked in Morristown and Westfield, than it is now that I work in Midtown Manhattan. I think you’re investing a tremendous amount of credence in state boundary lines that may or may not have real significance, depending on where in the state you live.
Ann (298)-
I told my agents that if I as much as think they’re wasting their time on this “The Secret”-type stuff, they’ll be free to spend every day watching this swill on Oprah and listening to tapes…since they won’t be working here anymore.
“Rules of Attraction”, my ass. Work your leads, get a buyer or seller under wing and make things happen. How’s that for your mother*&^%$ rules of attraction?
Realtors….be upfront…set the parameters…if they don’t seem to understand or appreciate your unique situation….move on. You will find one who does.
You want a nice addition to your portfolio…look at FXP today (yeah, that Chinese double ultra-short ETF.)
Up 12% yesterday, down 16% today. We just might have a new substitute for laxatives. Bi, now go find the pharma company with most exposure to laxs and short it.
dream [302],
Any options on those?
I had been working with a Coldwell Realtor for about 4 months and just finally cut the chord. I was up front and extremely informed with the market but she continued to drink the Red Bank Kool-aid and refused to show listings outside of the coldwell office. At first, she talked a good game with being on board with where my price point and offers were going to be, but when it was time to draft a low ball offer she stated “well you certainly don’t want to insult these people”. I immediately got out of my chair, thanked her and left the office. Despite completely embarrassing my wife, I think the move was necessary.
#283
BC Bob the number was projected to decline 2.5% and it did not,that is good news no matter how you slice it.
#295
Re: Goldman
They are still masters of the universe. They produced the third best quarterly profit in the company’s 138 year history. Amazing. Today’s news was just a reiteration that they are won’t be hurting too much from the credit crunch, they already took their losses and hedged against future loss and again good news causes the market to rally.
“I think the move was necessary.”
Secondary [304],
…and warranted.
2M (304)-
Bravo!
dream (302)-
Someone needs to find bi a laxative for what’s between his ears.
Sean [305],
If you follow any markets, mom reports mean s*it. A better reading would be evaluating a moving average, or yoy. The report, yoy was putrid, at best. A moving average? It would depict a downhill ski slope. Get out the pom poms.
My Goldman comment was sarcastic.
304 Secondary
I’m already getting some “don’t insult the sellers” vibes like that in our househunt. The realtors are so emotionally attached to (and I guess invested in) keeping the local prices high.
We’ll see how far it goes. If our realtor doesn’t want to present our reasonable offers, then we’ll do as you did, and find someone else who will. There is no “insulting the sellers.” It’s just business, not personal. Just like I shouldn’t be insulted when I walk in and the seller’s house smells like dinner and ten cats and the carpet hasn’t been replaced in twenty years.
Secondary [304], nice move. I does not matter what the realtor thinks its worth nor does it matter what the seller thinks its worth. Its what the bidder thinks its worth that matters in this market. Good for you for firing her on the spot. She put agenda ahead of yours…..shame on her.
“reinvestor101 Says:
November 13th, 2007 at 3:14 pm
The last comments by Kettle and Homer put a fork in me. I’m “done” trying to respond to these attacks.
You won’t have me to kick around anymore. Goodbye.”
Yeah
See you tomorrow.
How about these sellers insulting qualified buyers?
“bi Says:
November 13th, 2007 at 3:57 pm
now it is the time to grab some real estate bargains.”
Can you please let us all know as soon as you actually buy a property, bi?
Until then, I’ll assume you’re selling.
Sean (305)-
72 billion in Level 3 assets is all I need to know to prevent me from ever putting as much as a buck on GS until this whole purge is well behind us. GS has been very vocal for some time in asserting its short position on mortgages…yet, they were in there cranking out charcuterie along with all the other players. I’m not buying the claim that they aren’t holding some of that sausage in their (metaphorical) fridge.
Something’s just a little fishy there.
“Kettle1 Says:
November 13th, 2007 at 3:16 pm
Nj patient…
what dies the 25.25 mean in your post, i keep seeing this in others posts….
“Anyone who still thinks 25.25 is real, please let me know.”
I think that was a construction of ChiFi – it refers to reinvestor101’s 101, which keeps getting discounted.
Ann [310] and Secondary [304] – have your attorney fax an offer with an expiration of 48 hours.
Also, what was lost in the RE news today is that Countrywide loan originations are off 50% year over year!!!! I doubt people are paying cash so it will get worse before it gets better.
Sean #305
projected to decline 2.5%
It was also projected to increase as much as 3%. But month to month doesn’t matter, it’s year over year, down 20%.
And that’s bad. Really bad no matter how you slice it.
thank you all.
needless to say, if any one can recommend a good realtor in mon. county, please let me know.
“Essex Says:
November 13th, 2007 at 4:01 pm
Confession: I work 2.5 miles from my house….Yes, I suck.”
Better for you, better for your family and better for the world. I’m quite jealous, as I’m one of those commuters that Homer despises. In my case, it happens to be better for my family, but it sure doesn’t make me ecstatic.
(309) BC Bob I gather you don’t day trade at all.
My friskie eater comment also was sarcastic. If you every leave a room full of cats alone long enough you will find the will tear each other apart, and as of late that is what has been going on here so cheer up already we are still on the bunny slope and won’t hit the double diamonds for a few years.
(315) Clotpoll
Not every single bank will go down folks. There are always two sides to every trade.
Is you concern over FASB warranted? It all depends on who is pricing the level 3 assets. Suffice it to say it won’t be anyone on this friskie eating chat board.
More from MarketWatch:
Index of pending home sales tumbles in Sept.
An index of contract signings on existing homes fell significantly in all four regions from year-ago levels, according to data released Tuesday, suggesting that “there is still no bottom in sight” for housing, said one economist.
…
“These data now suggest that after a weaker spring and summer sales season, the autumn looks to be no better and there is still no bottom in sight despite the slight increase this month,” wrote Joshua Shapiro, chief U.S. economist with MFR Inc. “Sales will continue to fall until there is a greater price capitulation by sellers, as it still appears that we have not reached market-clearing prices to reduce the inventories of unsold existing homes.”
…
September’s “pause in the plunge” does not change the pending sales trend, which remains “sharply downwards,” wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.
He added that pending sales fell at a 42.1% annualized rate during the third quarter — “easily the worst performance” since the data were first recorded in 2001.
“Looking a bit further ahead, though, we expect the decline in sales to continue, because the inventory overhang continues to depress prices and people are reluctant to borrow to buy depreciating assets,” Shepherdson said.
Secondary (304),
Amen! Do it every time!! If the house ushers can’t make the payments on their 3 series, it ain’t your problem. Buh bye. NEXT!!
“Is you concern over FASB warranted? It all depends on who is pricing the level 3 assets. Suffice it to say it won’t be anyone on this friskie eating chat board.”
Sean, you might be surprised who’s on this friskie eating chat board.
In fact, let the realtors keep brainwashing the sellers and convincing them to hold on. The market termites will be steadily eating the foundation out from under them and when the sh*t really hits the fan, it truely will be blood in the streets.
I’m hoarding Ramen……anyone else?
3’s are more reasonable than you might think…..but that 335….now ‘that’ is a hot one…..*drool
Seriously though Gary….you just showed your hand….because if you were really in touch with the culture of conspicuous consumption you would have said — “make the payments on that 7 series”…and I would have believe you were for real. FYI
Essex,
Perhaps it’s the 9 series. :o
Tommy: “The point is, how do you know the fairy isn’t a crazy glue sniffer? “Building model airplanes” says the little fairy; well, we’re not buying it. He sneaks into your house once, that’s all it takes. The next thing you know, there’s money missing off the dresser, and your daughter’s knocked up. I seen it a hundred times.”
Junk Bond
Based on their credit ratings, corporate bonds are arbitrarily divided into investment grade bonds and junk bonds. The dividing line is the BBB rating, which is the lowest credit rating considered to be investment grade. Below BBB–, bonds are considered junk. Less common, but less disparaging names for junk bonds are below investment grade, speculative grade and high-yield bonds. Junk bonds combine features of debt and equity. Legally, they are debt. In the event of bankruptcy, the bond holders essentially become equity investors. Accordingly, the prices of junk bonds tend to be very sensitive to the fortunes of the issuer. At lower credit ratings, prices for a firm’s debt and equity can be highly correlated.
Junk bonds will forever be associated with the defunct investment bank Drexel Burnham Lambert and that firm’s star trader Michael Milken. Drexel Burnham was formed in 1973 with the merger of Drexel Firestone and Burnham and Company. Drexel Firestone was a white shoe investment bank whose better days were behind it. Burnham and Company was a Jewish bucket shop. The Belgian firm Bruxelles Lambert acquired an interest in 1976. Ignored by former Fortune 500 clients and the prestigious investment banks of Wall Street, Drexel Burnham Lambert struggled to reclaim the reputation Drexel Firestone once had—or at least carve out some niche for itself. In the early 1970s, it appeared that Drexel’s niche might be serving mid-sized firms—those with limited access to bank or capital markets financing.
Michael Milken traded high-yield bonds for the firm. He was an unassuming, occasionally obsessive genius who sported a toupee. In 1973, there was hardly a market for his bonds. Firms rarely issued below investment grade bonds. Most of what Milken traded were fallen angels—bonds issued by firms that had since become troubled. He believed that, precisely because such bonds were shunned, they offered exceptional value. Academics had proposed this thesis before, but it was Milken who proselytized it. He went out and found buyers for his bonds. He shared his vision with portfolio mangers at savings & loans, insurance companies, pension funds and mutual funds. His arguments made perfect sense. Investors who could get beyond the stigma of junk, made handsome returns. Milken’s network of buyers grew.
In 1977, Lehman Brothers underwrote a number of below investment grade issues—USD 75MM for steel maker LTV, USD 75MM for Zapata Corporation, USD 60MM for Fuqua Corporation, and USD 53MM for Pan Am. Actually issuing below investment grade debt was a novel idea. Milken reasoned that he could do the same thing. He already had the distribution network, and underwriting the debt would dovetail with management’s vision of serving a clientele of mid-sized corporations that had limited access to financing. Junk bonds—structured as subordinated debentures—combined appealing qualities of both debt and equity. All that was needed was buyers—and Milken had buyers.
In April 1977, Drexel did its first deal, a USD 30MM syndicated loan for Texas International. Drexel did six more deals that year for a total of USD 124MM. The firm was finding its niche, and Milken was making it happen.
In 1978, Milken asked that he be allowed to move the firm’s junk bond operations from Manhattan to Los Angeles. With Milken single-handedly accounting for most of the firm’s profits, management could hardly say no. Milken pulled up stakes and moved his staff of 30 to new offices on the West Coast. There, he was shielded from day-to-day oversight, which Milken detested. His business continued to blossom.
Over the next decade, Milken raised funds for more than a thousand firms, including MCI, CNN, McCaw Cellular, Warner Communications, and Chrysler. Soon, Milken was issuing junk bonds to finance hostile takeovers, helping to fuel a takeover boom. Greenmailers and takeover artists—including T. Boone Pickens, Saul Steinberg, Carl Icahn, and Ronald Perelman—flocked to his Beverly Hills offices. Milken routinely provided these raiders with more financing than they needed, so they could turn around and participate as investors in his other junk bond offerings.
Drexel was the master of the mushrooming market for junk bonds. Other investment banks tried to emulate Milken, but they were small players. Milken was the “junk bond king.” He knew the issuers. He knew the buyers. He knew who owned what bonds. If a client had to get out of a position, Milken would find him buyers. If an issue was close to default, Milken would organize a restructuring—replacing existing debt with higher-yielding debt that pushed payments further into the future. Milken had the clout to convince investors to accept such terms. He insisted on absolute loyalty. If a client worked with another bank, Milken would hear about it—and the transgressor could expect to pay. Access to Milken’s steady stream of deals was the life blood of junk bond mutual fund managers. They couldn’t afford to alienate him. Corporate raiders knew no one could raise capital on short notice the way Milken could.
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Today, the 1980s are remembered as the “decade of greed”. Investment bankers, takeover artists and arbitragers made fantastic profits from junk financed takeovers. Not all those profits were made ethically or even legally. Insiders swapped privileged information and other favors freely, assuming they could never be caught. Regulators and law enforcement officials knew that abuses were widespread. Routinely, company’s stock prices would move dramatically just before a major announcement. The challenge was identifying and somehow bringing to justice the perpetrators.
Dennis Levine was an investment banker with Lehman Brothers who eventually moved to Drexel. He had formed an insider trading ring of professionals working at a number of Wall Street firms. Participants exchanged and traded on inside information they obtained through their work. Levine placed his trades through an account maintained under an assumed name at Bank Leu in the Bahamas. Bank Leu executed those transactions through several brokers, including Merrill Lynch. One of Merrill Lynch’s brokers suspected that trades from Bank Leu were based on inside information and started piggy backing personal trades on the Bank Leu trades. In May 1985, Merrill Lynch detected suspicious activity in that and two other brokers’ personal trading accounts. Following an internal investigation, they passed the information to the Securities and Exchange Commission (SEC). The ensuing investigation lead to Bank Leu and eventually to Dennis Levine.
The SEC and the US Attorney’s office for Southern Manhattan conducted parallel investigations that soon extended beyond the immediate participants in Levine’s ring. Abuses were widespread. There seemed to be an entire web of relationships among professionals exchanging information and other favors, including the parking of stock, the accumulation of stock to pressure firms’ management, and stock price manipulation. Levine’s ring provided investigators a point of entry to this web. Famous market participants were soon embroiled in the investigations, including investment banker Martin Siegel of Kidder Peabody, arbitrager Robert Freeman of Goldman Sachs, and arbitrager Ivan Boesky, who ran his own trading firm.
Inexorably, the investigations led to Milken. At the center of his junk bond universe, Milken was engaged is numerous abuses. He traded on and exchanged inside information gleaned from his junk bond underwriting. He was engaged in stock parking and colluded with Boesky and others to manipulate the stocks of takeover targets. He actively misled regulators.
Milken set up a number of limited partnerships for himself and his family. These posed blatant conflicts of interest, but management at Drexel was largely in the dark about them. The limited partnerships made extraordinary profits, benefiting from Milken’s insider information. One trick Milken employed frequently was to insist that clients for whom Drexel underwrote junk bonds bundle stock options on their own stock with the junk bonds. Milken claimed that the options were a necessary inducement to get investors to buy the junk bonds. In actuality, Milken would keep the options and place them in the limited partnerships.
To promote loyalty, Milken invited select Drexel employees and investors to invest in limited partnerships. For anyone unperturbed by the blatant conflicts of interest, receiving an invitation to invest was like winning the lottery. One famous investor was Patsy Ostrander, who managed a junk bond fund for Fidelity Investments. In 1991, she would be charged with accepting illegal compensation and failing to inform her employer of her personal investment. Convicted in July 1992, she served a two month prison term.
Despite its enormous influence, Drexel had few allies outside Milken’s network of clients. Drexel was largely a one-product upstart that alienated other investment banks. Corporate consolidations and layoffs resulting from the takeover boom attracted resentment on main street. Drexel had little influence in the halls of government. If things started to unravel, the firm had few friends to turn to.
On November 14, 1986, things started to unravel. That was the day Federal prosecutors revealed that Ivan Boesky had pled guilty to charges of insider trading and agreed to pay a USD 100MM fine. He had also agreed to cooperate in the ongoing government investigations. November 14 came to be known on Wall Street as Boesky Day.
Ivan Boesky was the son of a Russian immigrant who ran a number of seedy bars around Detroit. A lawyer by training, Boesky found work on Wall Street during the mid-1960s. His wife Seema was the daughter of Ben Silberstein, whose real estate fortune helped Boesky launch his trading firm in 1975. Through that firm, Boesky speculated on the stocks of takeover targets. He became a close associate of Milken, who ultimatly recapitalized Boesky following a significant loss. Milken and Boesky developed a close relationship, exchanging information and favors. They spoke on the phone almost daily. When government investigators secured Boesky’s cooperation, Milken’s days were numbered.
It took almost two years for investigators to develop their case against Milken and Drexel. During that time, Drexel conducted a spirited public relations campaign, sullying the investigators’ actions and promoting Milken as a “national treasure” whose junk financing had rescued companies and created jobs. Milken, who had always shunned publicity, was soon making public appearances and immersing himself in charitable works.
In September 1988, the SEC filed a complaint against Drexel, Milken and five other individuals. That December, under the threat of indictment, Drexel settled with the Attorney’s office, agreeing to plead guilty to six felony counts of mail, wire and securities fraud and to pay USD 650MM in fines and restitution. Drexel also agreed to settle with the SEC and to assist the Attorney’s office in its case against Milken. Two months later, Milken was indicted on 98 counts including stock manipulation, insider trading and racketeering. In a plea-bargain, he agreed to plead guilty to six charges and to pay USD 600MM in fines and restitution. He was sentenced to ten years in prison.
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Without Milken, Drexel’s business soon floundered. The firm continued to underwrite junk bond offerings, including a massive 1989 LBO deal for RJR Nabisco. However, without Milken, the firm had a hard time placing the debt. Increasingly, Drexel had to buy the bonds itself, tying up capital in illiquid, high-risk investments. When junk bond issuers couldn’t make payments on their debt, Milken was no longer there to force investors to accept restructurings. Instead, the issuers—starting with Integrated Resources in 1990—defaulted. Drexel’s capital was rapidly being depleted. The cost of the legal settlement, attorneys fees, bonuses paid to keep key employees and now losses on its own junk bond positions pushed Drexel over the edge. In February 1990, Drexel filed for bankruptcy protection.
The following year, Milken was incarcerated at a minimum-security facility in Pleasanton, California. Two years later, he was diagnosed with prostate cancer. His sentence was reduced to time served, and he was released.
As Drexel failed, the US economy stumbled towards recession. In 1990, default rates on junk bonds skyrocketed, rising from 4% to 10%. The market has since recovered, but not with the vigor of the mid 1980s. Because of their stigma, junk bonds still tend to trade at depressed prices. It was this realization that attracted Milken’s interest in the 1970s.
The same phenomena today helps fuel the market for collateralized debt obligations (CDOs).
The financial crimes of the 1980s motivated Oliver Stone’s famous movie Wall Street. Its high-powered arbitrager, Gordon Gekko, announces “greed is good”—mirroring an actual comment made by Ivan Boesky.
Squalor, crime follow wave of foreclosures (Atlanta): http://www.msnbc.msn.com/id/21773482/
Confused,
A link a couple of paragraphs should suffice.
More from MarketWatch:
Bank of America Sees $3 Billion Write-Off, CFO Says
Bank of America Corp., the nation’s second-largest bank, may need to write down $3 billion in debt securities in the fourth quarter that have lost value because of defaults on subprime mortgages. Shares gained the most in almost five years on investor sentiment that the worst may be over.
Much more at the link above
Sean [321],
You can gather whatever you want. I hope it does result in a service interpreting monthly reports. Only rookies, bear or bulls, actually cheer monthly reports. They are good for one scenario, take out the stops above and below the market.
I never stated that we have experienced the worst in this market. We are only in the early stages of this bust, maybe the 4th or 5th mile of a marathon. If you have read my past posts, 5-7 years of declining prices.
By the way, how do you interpret a 20%, yoy decline?
I don’t know a lot about commercial real estate, but it doesn’t surprise me that the Altria building would go for $800 a square foot when crappy manhattan apartments go for $1000 a square foot. The Altria building has one of the best locations in Manhattan right behind grand central station
#303, BCBob I haven’t kept track….
PRE
Take a look at this for starters regarding phoenix and the general southwest water problem
http://tinyurl.com/2p6day
perhaps this pre..
U.S. Southwest Drought Could Be Start of New Dust Bowl
http://tinyurl.com/3xhpft
Regarding # 333 D
That article pointed out something that people on this board have speculated about before..
“according to a recent study by Dan Immergluck of Georgia Institute of Technology in Atlanta and Geoff Smith of Woodstock Institute in Chicago.
That study showed that when the foreclosure rate increases one percentage point, neighborhood violent crime rises 2.33 percent.”
#305 sean: GS was in serious trouble in 1994, but hey what do I know, I only worked there.
They have made some serous missteps over the years.
Now that they are public,it will be much more difficult for them to uhmmmm, keep some things under their hat, but do not think for one minute that they cannot screw up.
If you find a good property at a good price now, why would you wait for blood to run in the streets? I agree prices need to come down across-the-board, but if you find a good deal, why wait? Can you be sure that house will be available a year from now?
#339 Phoenix? Nothing personal,but its a dump.
#304 EXCELLENT!!!
do people here generally agree or disagree with the itulip 10-15 year bubble cycle prediction?
here is the link, it was posted above also
http://tinyurl.com/gugva
3b,
see comments 231 and 282
pre and i are having a side debate about the southwest… sort of… Personally i have never been to phoenix.
(335) Bob
How much and how long? That is the trillion dollar question. Sure we all can take shots in the dark and say 3 yrs, 5-7 yrs, heck I have even read elsewhere it will take 15 years to reach bottom. We all know its going down but there are just too many factors to predict when.
As far as the yoy number it was about time the 500k crack houses were properly priced.
342 thunderbolt
We’re not going to wait years for the “blood in the streets” to buy. As long as we really like the house and don’t feel I am overpaying for it now, this minute, I will go for it. We are planning on never moving again, so that factors in too.
The fact is, no one knows for sure that the market is going to crash, crash, crash down to pre-boom prices. Just like we didn’t know when this crash was starting, just like no one knew when the boom was going to start.
However, I may be singing a different tune once my reasonable offers start getting rejected. Then renting might be fine for a few years alright.
“How much and how long? That is the trillion dollar question.”
Sean [348],
I have said from day 1, on this site, 30-40% off 2005 highs, in a 5-7 year time frame, peak to trough. I probably have been too conservative. That said, the decline and duration will be much more severe and extended than most can imagine. Once the trend turns and the next trend commences, it becomes a marathon.
BC Bob, the case/shiller index for the last real estate decline in the New York Metro area showed only a 13 point decline or 15% from 1998-2001, and then the market was relatively flat for 1991 until 1998 when it took off like a rocket.
Factor in unemployment which reached about 8% in NJ during that period and then factor in interest rates which were as high as 11% in the early 90s. The market was still flat but declines were no where near 40%.
Who is to say that cycle won’t be repeated? Even with high unemployment and high interest rates properties may not decline 40%.
factor in interest rates which were as high as 11% in the early 90s. The market was still flat but declines were no where near 40%.
Although interest rates fell significantly during the 1990’s, which probably absorbed much of the correction as houses returned to more normal levels of affordability.
If fact, factoring in falling prices plus falling interest rates, meant that a mortgage payment fell by about 50% for the same house purchased in 1998 versus 1988.
This time around, we don’t have the luxury of starting with high interest rates that leave room for significant drops.
sean (322)-
Sorry if I gave the impression that I felt GS would crash. That wasn’t my intent. And, I do believe they took the other side of the trade and did it well enough to come through this mess in better shape than the other I-banks. They are- by all accounts- the smartest guys in the room.
However, it’s a stretch to assume that they will come out of this mess unscathed. If their Level 3 stuff is so pristine, let the market price it…and let the chips fall where they may.
“Sean Says:
November 13th, 2007 at 9:45 pm
BC Bob, the case/shiller index for the last real estate decline in the New York Metro area showed only a 13 point decline or 15% from 1998-2001, and then the market was relatively flat for 1991 until 1998 when it took off like a rocket.”
I’m guessing you didn’t control for inflation, which was super-high during the last bust.
Run your numbers through this:
http://www.westegg.com/inflation/
#352 sena; In those days, people had to have a down payment, and there was no funny money loans around, like we had these past few years.
That is what is going to help amke this down turn so much worse.